EUR/JPY discovers resistance near 161.00 as ECB Lagarde sees rate cuts in summer

The EUR/JPY pair has found an intermediate resistance near 161.00 in the European session. The asset has sensed nominal selling pressure as European Central Bank (ECB) President Christine Lagarde has signalled that the central bank could start the ‘rate-cut’ cycle in summer.

ECB Lagarde refrained herself from announcing a victory over inflation as she believes that price pressures are far from the required rate of 2%. But added that collective wage agreements, which will release after late spring, will provide an idea where households’ income is going. ECB policymakers have been emphasizing on maintaining a restrictive interest rate stance, stating that it is too early to announce rate cuts.

Meanwhile, uncertainty over Middle East tensions have deepened upside risks to energy prices. Iran-backed Houthi group has threatened to retaliate for airstrikes by the US military on their bases in Yemen. Houthi rebels are expected to disrupt the commercial shipments through Red Sea, which could lead to a sharp increase in the oil prices. This can accelerate price pressures in the Eurozone and could delay potential rate cuts.

On the Japanese Yen front, investors await the National Consumer Price Index (CPI) data for December, which will be published on Friday. Price pressures are expected to remain above 2% but are not expected to move needle in favour of an early exit from the ultra-dovish interest rate policy. Earthquake in Japan, easing inflation in Tokyo and bleak wage growth would restrict the BoJ for unwinding the expansionary monetary policy.