The EUR/JPY currency pair is trading positively around 161.85 in the early hours of Thursday’s Asian session. A dovish stance from Japan’s Prime Minister Shigeru Ishiba is contributing to a decline in the Japanese Yen. Market participants are also anticipating a potential interest rate cut from the European Central Bank (ECB) at its upcoming meeting in October.
During Thursday’s early European trading, the EUR/JPY has gained momentum to approach 161.85. The Yen’s weakness is attributed to Ishiba’s comments regarding Japan’s economic conditions, where he emphasized that the nation is not currently positioned for a rate increase. Following a discussion with Bank of Japan (BoJ) Governor Kazuo Ueda, Ishiba indicated that the environment does not support further rate hikes in the immediate future. This sentiment has led traders to recalibrate their expectations regarding interest rates, diminishing the likelihood of a near-term increase.
In line with the official’s remarks, Governor Ueda reiterated the BoJ’s cautious approach to monetary policy. Additionally, BoJ board member Asahi Noguchi emphasized the importance of maintaining an accommodative stance for the time being, suggesting that it may take considerable time to alter perceptions about inflation growth. Current data indicates that traders are pricing in less than a 50% probability of a 10 basis point hike from the BoJ before the year’s end.
On the European front, increasing speculation around an interest rate cut by the ECB is expected to impact the EURO negatively, potentially limiting upward movement in the EUR/JPY pair. Recent indicators show that Eurozone inflation has dropped to 1.8% year-on-year in September, falling short of the ECB’s target of 2%. An official from the ECB pointed out that there is a compelling case for a rate reduction at the upcoming meeting, as the economic landscape in the Eurozone may be approaching a crucial juncture.
