EUR/JPY steady around 132.00 ahead BoJ and ECB monetary policy meetings

The EUR/JPY retreats for the second time in the week dropped from 132.52 to 131.58 but stabilized at 132.06 amid mixed-market sentiment as the Asian session begins

Mixed market sentiment ahead BoJ and ECB central bank meetings, to keep EUR/JPY within a tight range

A mixed market sentiment spurred a flight to safe-haven assets, boosting the prospects of the Japanese yen and the Swiss franc. Also, precious metals appreciated as government bond yields around the globe, headed by US Treasury yields, plummeted, reinforcing the inflation hedge status of gold and silver.

US political uncertainties around the budget and the spending bills, among central bank tightening with the Bank of Canada adding its name to the list of policymakers normalizing its monetary policy, kept investors at bay. Further, month-end flows prompted market participants to dump anything with the “risk” word attached to it.

Bank of Japan (BoJ) Monetary Policy Preview

On Thursday, the Japanese economic docket will feature the Bank of Japan, which will release its Interest Rate decision, Monetary Policy Statement, and Outlook Report.

According to Dhwani Metha, Analyst at FX Street, “the BOJ will keep the benchmark policy rate on hold at -10bps while maintaining its pledge to buy J-REITS at an annual pace of up to JPY180 bln.” Furthermore, she added that the stimulus measures would likely remain as the Bank of Japan diverges from fellow counterparts looking toward exiting the easy-money cycle.

The economic outlook is seen slashing down the 2021’s growth and inflation estimates, followed by a weaker summer due to the COVID-19 lockdowns and supply chain disruptions.

Nevertheless, the bank will stick to its forecast of a moderate recovery, per Reuters report.

Read more: BOJ Preview: Focus on outlook tweaks ahead of general election

European Central Bank (ECB) Monetary Policy Preview

The European Central Bank will unveil its Interest Rate Decision on the Eurozone front, alongside the Monetary Policy Decision. Furthermore, ECB President Christine Lagarde will host a press conference. Additionally, Germany will feature the Harmonized Index of Consumer Prices for October, estimated at 4.5%.

According to Yohay Elam, Analyst at FX Street, “the bank is set to leave its policy unchanged and wait for its December meeting – when it compiles new economic forecasts – to make any potential announcements. That means investors will be focused on ECB President Christine Lagarde’s press conference.”

Furthermore, he commented that lower economic growth, and fewer inflation worries, would lead to a dovish message of more support from the ECB. 

Read more: European Central Bank Preview: Three reasons why Lagarde is set to lower the euro

All that said, both currencies are in the hands of policymakers. Though the Japanese yen is “very” sensitive to risk-flows, any fear surrounding the market would trigger Yen appreciation.

Contrarily, the shared currency has relied upon its counterparts like the USD and the JPY to determine the trend direction of the EUR/USD and the EUR/JPY pairs.

EUR/JPY TECHNICAL LEVELS TO WATCH