EUR/JPY recovers from 142.00 as Japan approaches BOJ Amamiya to handle monetary policy

• EUR/JPY has recovered to near 142.80 as Japan approaches BoJ’s Amamiya as a successor of BoJ’s Kuroda.
• A spell of a contraction in Eurozone Retail Sales might continue amid higher interest rates by the ECB.
• The ECB is expected to increase interest rates in May after a 50 bps interest rate hike in March.

The EUR/JPY pair has displayed a sharp recovery move after correcting to near 142.00 in the Asian session. The cross has recovered to near its intraday high around 142.80 as Japan’s administration is trying to rope in Bank of Japan (BoJ) Deputy Governor Masayoshi Amamiya to succeed Haruhiko Kuroda as the head of the central bank, according to a report from Nikkei, reported by Bloomberg.

The nominations for the successor of BoJ’s Kuroda will be finalized in February, and discussions about an exit from the decade-long ultra-loose monetary policy will get more fire.

The BoJ has already widened the yield curve to provide more flexibility. Last week, BoJ Deputy Governor Masazumi Wakatabe cited that “BoJ's Dec decision to widen band was a necessary step to make YCC more sustainable, but the move alone may have had the effect of weakening stimulus effect.”

On the Eurozone front, investors are awaiting the release of the Retail Sales data for fresh impetus. The economic data is expected to contract by 2.7% from a prior contraction of 2.8% on an annual basis. The monthly data is seen contracting by 2.5% against an expansion of 0.8% reported earlier.

The Eurozone economy is recording a contraction in consumer spending consecutively for the past five months, which will delight the European Central Bank (ECB) ahead as it will scale down Consumer Price Index (CPI) projections.

For the interest rate guidance, ECB Governing Council member Pierre Wunsch told Reuters on Friday that the ECB won't go from a 50 basis points (bps) rate hike in March to a zero in May. Wunsch added that a 25 bps or a 50 bps hike is possible in May.