EUR/JPY bounces back strongly as ECB signals pause in current policy-easing cycle
- EUR/JPY claws back early losses and turns higher to near 166.60 as the Euro outperforms.
- ECB officials have signaled that the monetary-easing cycle has come to an end.
- The safe-haven demand for the Euro has increased, being a liquid alternative to the US Dollar.
The EUR/JPY pair revisits the seven-month high near 166.60 during European trading hours on Thursday after recovering initial losses. The pair strengthens as the Euro (EUR) outperforms across the board after European Central Bank (ECB) officials signaled that the central bank could announce a pause in the current monetary policy expansion cycle.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.94% | -0.31% | -0.62% | -0.30% | -0.22% | -0.46% | -1.01% | |
| EUR | 0.94% | 0.64% | 0.33% | 0.65% | 0.70% | 0.48% | -0.05% | |
| GBP | 0.31% | -0.64% | -0.33% | 0.00% | 0.06% | -0.17% | -0.70% | |
| JPY | 0.62% | -0.33% | 0.33% | 0.32% | 0.39% | 0.11% | -0.38% | |
| CAD | 0.30% | -0.65% | -0.01% | -0.32% | 0.08% | -0.19% | -0.71% | |
| AUD | 0.22% | -0.70% | -0.06% | -0.39% | -0.08% | -0.23% | -0.76% | |
| NZD | 0.46% | -0.48% | 0.17% | -0.11% | 0.19% | 0.23% | -0.54% | |
| CHF | 1.01% | 0.05% | 0.70% | 0.38% | 0.71% | 0.76% | 0.54% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
ECB board member Isabel Schnabel said in Brussels during European trading hours, “This monetary-policy cycle is coming to an end as medium-term inflation is stabilizing around target,” Bloomberg reported. Schnabel said that she expects inflation to be around 1.9% both in 2026 and 2027 and quoted it as “right at target”. She signaled that the growth outlook is stable despite trade war risk.
Last week, ECB policymaker and Governor of the Bank of Estonia Madis Muller also signaled that the monetary expansion cycle is in the endgame. Muller said that he is comfortable with ECB President Christine Lagarde’s comments, indicating that the “policy-easing cycle is almost finished”. These comments from Lagarde came in her press conference last week after the ECB reduced interest rates by 25 basis points (bps) to 2% for the seventh time in a row.
Another reason behind the strength in the Euro is an increase in its safe-haven demand, being the liquid alternative to the US Dollar (USD). The safe-haven appeal of the US Dollar has diminished significantly amid uncertainty surrounding the United States' (US) tariff policy.
Although investors have underpinned the Euro against the Japanese Yen (JPY), the latter outperforms its other peers amid expectations that the Bank of Japan (BoJ) will raise interest rates again this year.
This week, BoJ Governor Kazuo Ueda kept the door open for further monetary policy tightening if officials get convinced that the underlying inflation moves around 2%.
For fresh cues on the interest rate outlook, investors await the BoJ’s monetary policy announcement on Tuesday. In the meeting, the central bank is expected to keep interest rates steady at 0.5%.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
