Euro continues to underperform against Japanese Yen, ECB policy awaited

The Euro (EUR) continued to underperform against the Japanese Yen (JPY) on Wednesday, falling to around 178.50 against JPY during European trading hours. The decline brought the currency close to its almost 10-month low of 177.85 reached the previous day. The Euro's weakness is largely due to the Japanese Yen's continued strength, as noted by analysts at Deutsche Bank.

They argue that Japan's recent wage data strengthens the case for the Bank of Japan (BoJ) to raise interest rates at its upcoming policy meeting, slated for September 18. Financial market participants are also speculating about a potential 50 basis point (bps) interest rate hike by the BoJ during the meeting. In contrast, investors are eagerly awaiting the European Central Bank's (ECB) monetary policy decision on Thursday.

The ECB is expected to raise interest rates during the meeting, which may boost the Euro (EUR). However, the outlook remains uncertain, with Deutsche Bank's survey showing investors split on the extent of the ECB's tightening cycle, with rates of 2.50%, 2.75%, and 3.00% being evenly distributed as possible terminal rates.