EUR/JPY aims to extend rally above 142.00 as ECB to continue policy-tightening further

The EUR/JPY pair has sensed barricades while extending its rally above the immediate resistance of 142.00 in the early Asian session. The cross is expected to continue its upside momentum as the European Central Bank (ECB) would continue to hike its interest rates further as the Eurozone inflation looks persistent and would take plenty of time in declining to near the targeted level.

ECB President Christine Lagarde confirmed that wage pressures are keeping Eurozone Consumer Price Index (CPI) at elevated levels while responding to questions from the press after the monetary policy announcement.

The street was mixed for the ECB’s interest rate decision as the debacle of Credit Suisse, the second-largest Swiss banking firm, alarmed fears of banking turmoil. There is no denying the fact that the announcement of the interest rate decision by the central banks is executed by commercial banks and instability in the latter could create troubles in managing the monetary policy.

Reuters reported on Thursday that European Central Bank (ECB) policymakers agreed to go ahead with a 50 basis points increase in key rates after the Swiss National Bank (SNB) "threw a lifeline" to Credit Suisse. Also, ECB's policy debate was between a 50 basis points hike or leaving rates unchanged. There was no discussion of a 25 bps hike.

For further guidance, analysts at Rabobank see two more hikes of 25bp. Persistent unrest in financial markets is the main downside risk, but if this fades, inflation persistence could still require higher rates.”

On the Japanese Yen front, Bank of Japan (BoJ) policymakers and Japanese officials are pulling their socks to provide a cushion to inflation to remain steady above the 2% target. Japan’s PM Fumio Kishida said this week that they are aiming to raise minimum wages beyond JPY¥1,000 nationwide. Superlative wage gains are going to add effectively to the upside filters for the inflationary pressures as households will be equipped with more funds for disposal.