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Euro edges lower against the Japanese Yen despite ECB rate hike expectations

  • The Japanese Yen is recovering modestly on Thursday after several days of weakness.
  • Markets continue to expect another European Central Bank rate hike later this year.
  • Middle East tensions and higher energy prices are keeping risk aversion elevated.

EUR/JPY trades around 185.80 at the time of writing on Thursday, little changed on the day after reaching a one-month high earlier this week. The pair is edging slightly lower as the Japanese Yen (JPY) regains some footing, although expectations of further monetary tightening by the European Central Bank (ECB) continue to provide underlying support for the Euro (EUR).

Investors remain cautious as renewed hostilities involving Iran continue to push Oil prices higher and fuel concerns about a fresh inflationary shock. The rise in risk aversion is supporting the Japanese Yen, although the negative impact of higher energy costs on Japan's economy is limiting the currency's upside for now.

In the Eurozone, several European Central Bank (ECB) officials have recently reiterated their willingness to tighten monetary policy further if inflation risks intensify. Austrian central bank Governor and ECB Governing Council member Marin Kocher said the central bank stands "ready to act" should second-round inflation effects emerge, while Bundesbank President and ECB Governing Council member Joachim Nagel stated that it remains appropriate to "act decisively" if necessary.

These comments come as a Reuters poll shows that a large majority of economists expect the ECB to leave its deposit rate unchanged at 2.25% at its July meeting, while around 70% anticipate one additional rate hike before the end of the year, most likely in September. Rabobank shares this baseline scenario, arguing that the renewed escalation in the Middle East has increased upside inflation risks but is still unlikely to trigger a rate hike in July. ING also believes that a July hike remains a risk, although September continues to be the more likely outcome.

In Japan, doubts surrounding the government's plan to repatriate part of the Government Pension Investment Fund (GPIF) overseas investments continue to weigh on the Japanese Yen. Investors remain skeptical about how quickly the initiative can be implemented, limiting its positive impact on the currency. Japan's Finance Minister Satsuki Katayama nevertheless reiterated on Thursday that authorities stand ready to intervene in the foreign exchange market if necessary, while declining to comment on specific exchange rate levels.

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the British Pound.

USDEURGBPJPYCADAUDNZDCHF
USD0.28%0.59%0.18%0.12%0.14%0.23%0.51%
EUR-0.28%0.31%-0.09%-0.16%-0.07%-0.03%0.23%
GBP-0.59%-0.31%-0.39%-0.45%-0.38%-0.33%-0.05%
JPY-0.18%0.09%0.39%-0.09%0.02%0.05%0.33%
CAD-0.12%0.16%0.45%0.09%0.10%0.14%0.41%
AUD-0.14%0.07%0.38%-0.02%-0.10%0.06%0.31%
NZD-0.23%0.03%0.33%-0.05%-0.14%-0.06%0.26%
CHF-0.51%-0.23%0.05%-0.33%-0.41%-0.31%-0.26%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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