EUR/JPY poised for further upside in the next months – Rabobank

Jane Foley, Head of FX Strategist at Rabobank, expects the cross to edge higher during the current year.

Key Quotes

“The rally which drove EUR/JPY higher in November ran out of steam in early December. European political uncertainty has the capacity to boost volatility and push EUR/JPY lower in the coming months”.

“However, it is our central scenario that centrist governments will prevail after the Dutch, French and German elections this year and this suggests there is scope for a relief rally in the EUR, particularly after the second round of the French Presidential election on 7 May”.

“This factor combined with the improvement in recent Eurozone inflation and an unemployment data releases suggests the potential for moderate upside in EUR/JPY over the course of this year”.

“While the ECB has announced a commitment to QE for the duration of 2017, recent better data has re-opened the debate in Germany about whether policy settings are too easy”.

“By contrast, despite the optimism expressed by BoJ Governor Kuroda regarding the potential for the Japanese economy to benefit on the tail wings of strengthening global growth, there is little sign that the central bank is preparing to move away from its extremely accommodative position. We see potential for EUR/JPY to move back towards the 126 area medium-term”.