EUR/JPY retreats from post-ECB swing high, back around mid-128.00s amid risk-off

The EUR/JPY cross quickly retreated a few pips from the one-and-half-week high touched in reaction to the European Central Bank (ECB) decision and was last seen trading around mid-128.00s.

The shared currency strengthened across the board after the ECB stuck to its hawkish stance by offering a commitment to end its bond-buying program (APP) in the third quarter. The markets were quick to react and started pricing in the possibility of a 25 bps rate hike in October. This, in turn, was seen as a key factor that pushed the EUR/JPY cross higher for the third successive day on Thursday, though the worsening situation in Ukraine kept a lid on any further gains.

In fact, reports indicated that Russian forces have dropped several bombs on the children`s hospital and taken over parts of Mariupol. Moreover, the UK Armed Forces minister - James Stephen Heappey - warned of NATO intervention if Russia uses chemical weapons. Apart from this, negotiations between the Russian foreign minister and his Ukrainian counterpart broke down without any notable progress and dampened the prospects for a diplomatic solution to end the conflict.

This, in turn, took its toll on the global risk sentiment, which was evident from a fresh leg down in the equity markets, which benefitted the safe-haven Japanese yen. The anti-risk flow turned out to be the only factor that held back bulls from placing aggressive bets around the EUR/JPY cross and capped the intraday positive move near the 129.00 mark. Market participants now look forward to ECB President Christine Lagarde's comments at the post-meeting presser for a fresh impetus.

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