- EUR/JPY trades on a weaker note around 162.85 in Monday’s early European session.
- ECB's Stournaras said the central bank won’t have enough data to decide on rate cuts until June.
- A technical recession in Japan might prompt the BoJ to delay an exit from negative rates, which exerts some pressure on the JPY.
The EUR/JPY cross holds below the 163.00 mark during the early European session on Monday. The concern about a technical recession in Japan and the risk-on mood weigh on the Japanese Yen (JPY). However, the warning from Japanese authorities to intervene in the FX market might cap the downside of the JPY. The cross currently trades near 162.85, down 0.01% on the day.
The European Central Bank (ECB) Governing Council member Yannis Stournaras said on Friday that the central bank won’t have enough data to decide on interest-rate cuts until June, despite inflation seeming to be on pace to reach the 2% target this year. Meanwhile, ECB policymaker Mario Centeno said the central bank might be ready to consider cutting rates next month, if data call for it, even if that’s only a low-probability event. That being said, the divergence of monetary policy between the ECB and the Bank of Japan (BoJ) provides some support to the Euro (EUR) and acts as a headwind for the EUR/JPY cross.
On the other hand, Japan entered a technical recession as its Gross Domestic Product (GDP) unexpectedly contracted for two consecutive quarters and surrendered its position as the world's third-largest economy to Germany. The weaker GDP growth number might convince the BoJ to delay an exit from negative rates. This, in turn, drags the JPY lower against its rivals.
However, verbal intervention from the Japanese authorities might lift the JPY. Japan's Finance Minister Shunichi Suzuki said last week that the government is closely watching FX moves with a high sense of urgency.
The Japan’s Consumer Price Index (CPI) for January will be due on Tuesday. On Thursday, the German Retail Sales and CPI data will be released. The attention will shift to the Eurozone Harmonized Index of Consumer Prices (HICP) data on Friday. Traders will take cues from the data and find trading opportunities around the EUR/JPY cross.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
GBP/USD dips to 1.2445 with BOE's monetary decision
GBP/USD fell towards 1.2440 as the Bank of England left monetary policy unchanged, pointing to delayed yet potentially steeper rate cuts. The pair bounced from the level but remains depressed below 1.2500.
EUR/USD extends weekly decline, approaches 1.0700
EUR/USD grinds lower and nears 1.0700 in European trading hours. The US Dollar takes modest advantage of a mixed sentiment and the absence of relevant macroeconomic news. An uptick in government bond yields provides additional support to the Greenback.
Gold stable just above $2,300 ahead of a fresh catalyst
Gold price remains little changed for a fourth consecutive day on Thursday, trading just above the $2,300 mark. The soft performance of global equities keeps the bright metal afloat as investors hope for directional clues.
Solana meme coins TREMP, BODEN rise after Donald Trump’s pro-crypto stance
Solana-based meme coins TREMP and BODEN post nearly 125% and 7% gains on Thursday. Former US President Donald Trump says his campaign will likely accept crypto donations.
Bank of England inches one step closer to a summer rate cut
The Bank of England is undoubtedly turning more optimistic, but it’s keeping its options open amid some uncertainty surrounding the near-term inflation numbers. We still narrowly expect the first rate cut in August.