- EURJPY has resurfaced after dropping to near 146.50 as bets escalate for hawkish ECB policy.
- It is premature to determine Eurozone’s interest rate peak as the current inflation rate is far from target.
- An end to BOJ’s easy policy seems not in vision as the administration has announced more stimulus packages.
The EURJPY pair has witnessed fresh demand after declining gradually to near 146.40 in the Tokyo session. The cross may turn the trend tide towards the bullish trajectory after overstepping the immediate resistance of 146.70. The positive risk impulse is gaining traction as S&P500 futures have rebounded significantly. Also, the long-term US Treasury yields are facing downside pressure led by rising content for a lower rate hike by the Federal Reserve (Fed) than the prior extent.
The Shared Currency bulls are gaining strength as bets for a hawkish monetary policy by the European Central Bank (ECB) have accelerated. ECB President Christine Lagarde may opt for a continuation of bumper rate hikes as Harmonized Index of Consumer Prices (HICP) is hovering in double-digit figures.
A survey conducted by the ECB to gauge consumer expectations for inflation provided that consumers still see inflation at 3% in three years and 5.1% over the next 12 months.
ECB Governing Council member Martins Kazaks preferred not to dictate a peak for the interest rate in an interview in Riga, reported Bloomberg. He cited that Borrowing costs “are still way below where they should be” and must move to levels that equate to monetary tightening, not just a withdrawal of stimulus.
Meanwhile, in Japan, Bank of Japan (BOJ) Governor Haruhiko Kuroda has clarified that it is premature to debate an exit of loose policy by asking about an end of ultra dovish stance on interest rates. It is worth noting that the administration has announced back-to-back stimulus packages this week to spurt the aggregate demand. Therefore, the chances for termination of an ultra-dovish monetary policy seem a little.
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