EUR/JPY seeks support near 151.00 as ECB looks set for further interest rate hike
|- EUR/JPY is looking for a potential support around 151.00 as an interest rate hike by the ECB to widen ECB-BoJ policy divergence.
- Eurozone showed a contraction in the final reading of GDP in the first quarter of CY2023.
- Constant monetary stimulus is required in Japan as current inflationary pressures are inspired by higher import prices.
The EUR/JPY pair has sensed some support after a mild correction to near 151.00 in the late Asian session. The cross has remained in the bullish trajectory from the past few trading sessions as investors are hoping that the European Central Bank (ECB) will raise interest rates further.
ECB President Christine Lagarde has already raised interest rates to 3.75% in its long policy-tightening cycle over the past nine months. And, the street is anticipating one more interest rate hike by 25 basis points (bps), which will push interest rates to 4%. Inflation in Eurozone is more than three times of required inflation and ECB policymakers believe that the current monetary policy is not restrictive enough to threaten the shared continent’s growth.
However, economic prospects in Eurozone are telling a different story. The display of contraction in the Gross Domestic Product (GDP) figures consecutively for two quarters is considered a technical recession. And considering the definitional aspect of recession shows that the German economy has already reported a recession after posting a contraction in GDP.
In addition to that, Eurozone also showed a contraction in the final reading of GDP in the first quarter of CY2023.
Meanwhile, the Japanese Yen is struggling to remain on its feet as investors are confident that the interest rate decision by the Bank of Japan (BoJ) will remain unaltered this Friday. In order to propel wages and overall demand to spurt in-house inflation, constant monetary stimulus is required as current inflationary pressures are inspired by higher import prices.
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