EUR/JPY gains momentum above 162.70 as BoJ ends negative interest rate era

The EUR/JPY cross gains traction above the mid-162.00s during the Asian trading hours on Tuesday. The cross drifts higher after the Bank of Japan (BoJ) decided to end a negative interest rate era that began in 2016, in line with market expectations. At press time, EUR/JPY is trading at 162.77, adding 0.37% on the day. 

After the two-day monetary policy meeting on Tuesday, the BoJ decided to raise the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007. The decision was in line with market expectations. The BoJ policy statement showed that, given the current outlook for economic activity and prices, the BoJ anticipates accommodative financial conditions to be maintained for the time being. In response to the interest rate decision, the Japanese Yen attracts some sellers as the hawkish policy was widely priced in by the markets.

The European Central Bank (ECB) held the interest rate steady at its March meeting. However, the ECB policymakers signaled progress in easing inflation and started discussions about the timeline of the rate cut. The ECB Pablo Hernandez de Cos said that the central bank may start lowering interest rates in June if inflation in the eurozone continues to cool down. The ECB Governing Council member Klaas Knot penciled in June for a first-rate cut and expects three rate cuts this year.

Moving on, market players will focus on the German and Eurozone ZEW Survey, due later on Tuesday. Later this week, the German Producer Price Index (PPI) and the ECB's Lagarde speech will be in focus on Wednesday. On Thursday, the Eurozone HCOB PMI data for March will be released. These events could give a clear direction to the EUR/JPY cross.