EUR/JPY struggles to hold 150.00 as investors turn cautious ahead of ECB Lagarde’s speech
|- EUR/JPY is looking delicate around 150.00 as the focus shifts to ECB Lagarde’s speech.
- ECB policymakers are supporting more interest rate hikes as Eurozone core inflation is still persistent.
- The BoJ is expected to intervene in the currency markets to provide some cushion to the Japanese Yen.
The EUR/JPY pair is struggling in defending the auction above the psychological support of 150.00 in the European session. The cross is expected to remain on the tenterhooks as investors are awaiting the speech from European Central Bank (ECB) President Christine Lagarde before the European Parliament.
ECB Lagarde is expected to provide guidance about the likely monetary policy action in June’s monetary policy meeting. The street is convinced that the ECB will hike interest rates further despite the sheer softening of Eurozone inflation.
An in-depth investigation of the Eurozone’s May inflation report showed that headline price pressures slowed dramatically amid declining energy prices and food inflation while core inflation is still stubborn. Sticky core inflation makes the case stronger for more interest rate hikes by the ECB. Also, ECB policymaker, Boštjan Vasle, said on Friday, “More rate hikes needed to get inflation to the 2% target.” He further added, “Core inflation remains high and persistent.”
In addition to ECB Vasle, ECB Governing Council member, Gabriel Makhlouf, said that they are “likely to see another rate increase at the next meeting.“ He further added a fall in Eurozone inflation is welcomed but is not definitive with underlying pressures quite strong. It is likely that we will see another rate increase at the next meeting as the ECB has not reached the moment where it can say let's now stop.
Meanwhile, the Japanese Yen is making efforts to get an upper hand as the Bank of Japan (BoJ) is expected to intervene to provide some cushion to the domestic currency. According to the latest Reuters report, bets against the Japanese Yen have risen to $8.6 billion equivalent, which was a similar level when Japan’s authorities intervened last year.
Going forward, Japan’s Q1 Gross Domestic Product (GDP) will remain in the spotlight. Thursday’s GDP data is expected to expand by 0.5% vs. prior expansion of 0.4% on a quarterly basis. Annualized Q1 GDP is seen steady at 1.6%.
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