EUR/JPY falls back as ECB warns economic risks after easing monetary policy further

EUR/JPY turns upside down as the ECB anticipates deterioration in the Eurozone economic outlook due to Trump’s tariff measures.
The ECB has reduced its key interest rates by 25 bps for the sixth time in a row.
The Japanese Yen fails to capitalize on smooth trade talks between the US and Japan.

Sagar Dua FXStreet

The EUR/JPY pair gives up its entire intraday gains and ticks lower to near 161.50 during North American trading hours on Thursday. The pair faces a sharp sell-off as the Euro (EUR) underperforms after the monetary policy announcement by the European Central Bank (ECB).

The ECB has cut its key borrowing rates by 25 basis points (bps), as expected, pushed the Deposit Facility Rate and Main Refinancing Operations Rate lower to 2.25% and 2.4%, respectively. This is the sixth straight interest rate cut by the ECB in a row and the seventh time since June, when the central bank started unwinding the restrictive monetary policy stance.

It appears that the ECB has changed its stance from “accommodative” to “neutral” as it omitted to use the phrase that interest rates are still restrictive. However, it has posted a grim picture of the Eurozone economic outlook in the face of tariffs imposed by United States (US) President Donald Trump, which are currently paused for 30 days. “Outlook for growth has deteriorated owing to rising trade tensions,” the ECB said in the monetary policy statement.

Meanwhile, ECB President Christine Lagarde has expressed confidence that defence and infrastructure spending will bolster manufacturing activities in her press conference after the policy decision. Lagarde doesn’t expect that the economy has contracted in the first quarter but warns that the economic outlook is “clouded by uncertainty".

Though investors have underpinned the Euro over the Japanese Yen (JPY), it struggles to outperform against its other peers, even as US President Trump has confirmed that trade talks with Japan's economic revitalization minister Ryosei Akazawa went smoothly.

“A Great Honour to have just met with the Japanese Delegation on Trade. Big Progress!” US President Donald Trump wrote in a post on Truth.Social platform on Wednesday.

While Japanese officials are still concerned about the economic outlook due to the passive effects of Trump tariffs on their economy. Earlier in the day, Japanese Finance Minister Shunichi Kato said that he is “deeply concerned” about US tariffs affecting “Japan and the world economy”.

Economic Indicator

ECB Rate On Deposit Facility

One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.

EUR/USD holds losses near 1.1850 as US, China holidays keep trade muted

EUR/USD opens the week on a softer note, trading near 1.1860 during the Asian session on Monday. Activity is likely to remain muted, with United States markets closed for the Presidents’ Day holiday, while Mainland China is also shut for the week-long Lunar New Year break.

GBP/USD flat lines as traders await key UK macro data and FOMC minutes

The GBP/USD pair kicks off a new week on a subdued note and oscillates in a narrow range, just below mid-1.3600s, during the Asian session. Moreover, the mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold remains below $5,050 despite Fed rate cut bets, uncertain geopolitical tensions

Gold edges lower after registering over 2% gains in the previous session, trading around $5,030 per troy ounce during the Asian hours on Monday. However, the non-interest-bearing Gold could further gain ground following softer January Consumer Price Index figures, which reinforced expectations that the Federal Reserve could cut rates later this year.

Week ahead: Data blitz, Fed Minutes and RBNZ decision in the spotlight

The US jobs report for January, which was delayed slightly, didn’t do the dovish Fed bets any favours, as expectations of a soft print did not materialize, confounding the raft of weak job indicators seen in the prior week.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.