EUR/JPY rebounds to near 160.60 as Japan's economy returns to growth in fourth quarter
|- EUR/JPY could gain ground on growing speculation of BoJ lifting negative rates.
- Japan’s GDP QoQ increased by 0.1% in the fourth quarter of 2023, against the previous decline of 0.1%.
- Traders will observe ECB Lagarde’s remarks during the Eurogroup Meeting on Monday.
EUR/JPY recovers its intraday losses as the Japanese Yen (JPY) strengthened following Japan’s Gross Domestic Product (GDP) data showing Japan's economy returned to growth in the last quarter of 2023, thus turning away from a technical recession. The EUR/JPY cross attempts to rebound from weekly lows, trading around 160.60 during the early European trading hours on Monday.
Japan’s GDP quarter-on-quarter expanded by 0.1% in the fourth quarter of 2023, reversing the previous decline of 0.1% but falling short of the expected 0.3% growth. Meanwhile, the GDP Annualized figure showed a reading of 0.4% growth, below the market expectation of 1.1% and the previous decline of 0.4%. Consequently, Japan’s 2-year yield surged towards 0.20%, marking the highest level since 2011. Additionally, the 10-year government bond yield rose to near 0.75%.
These GDP figures have strengthened speculations that the Bank of Japan (BoJ) could commence raising interest rates soon. BoJ policymakers are reportedly inclined towards the notion of ending negative interest rates this month, driven by expectations of substantial pay hikes in the year's annual wage negotiations.
Last week, BoJ Governor Kazuo Ueda stated that it is "fully possible to seek an exit from stimulus while striving to achieve the 2% inflation target." Additionally, BoJ board member Junko Nakagawa recently commented that “prospects for the economy to achieve a positive cycle of inflation and wages are in sight."
On the other side, the European Central Bank (ECB) maintained borrowing costs at record levels last week, in line with expectations. ECB President Christine Lagarde adopted a cautious stance, stressing the need for further evidence before considering rate cuts. Market participants will closely watch Lagarde's remarks during the Eurogroup Meeting scheduled for Monday. Additionally, Consumer Price Index (CPI) data from Germany on Tuesday will likely attract attention from investors.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.