The EUR/JPY currency pair has shown significant upward momentum, approaching the 164.35 level during the early hours of trading in Asia on Wednesday. This rise comes amid a softening of the Japanese Yen, driven by ongoing uncertainty regarding potential interest rate hikes from the Bank of Japan (BoJ). As traders await the Eurozone’s third-quarter Gross Domestic Product (GDP) data set to be released on Thursday, market sentiment is leaning towards the EURO .
Recent comments from BoJ officials reveal a divided stance on the timing for a potential interest rate increase. The lack of consensus among policymakers highlights a cautious approach, which is compounded by rising political uncertainty within Japan. Such factors contribute to the Japanese Yen’s weakness, providing support for the upward trend in the EUR/JPY.
On the European side, a member of the European Central Bank (ECB) Governing Council has indicated that the central bank may continue to gradually reduce interest rates. Additional commentary from another ECB official suggests that further easing within the upcoming month appears probable, given the progress towards disinflation in the Eurozone, alongside concerns of a deteriorating growth outlook. Nonetheless, a careful and measured approach is advised as policymakers move forward.
In terms of market expectations, investors are fully anticipating a 25 basis point rate cut from the ECB during its final meeting of the year in December. Currently, the ECB’s deposit facility stands at 3.25%, underscoring the central bank’s ongoing considerations in response to economic conditions within the Eurozone. As the market digests these developments, volatility in the EUR/JPY pair may continue in the near term.
