Euro advances against Japanese Yen despite BoJ rate hike expectations
EUR/JPY edges higher on Monday and trades around 178.40 at the time of writing, up 0.12% on the day. The pair remains supported despite growing expectations of further monetary tightening by the Bank of Japan (BoJ), while the European Central Bank (ECB) policy outlook remains uncertain.
The Euro (EUR) strengthened against the Japanese Yen (JPY) on Monday, trading around 178.40, marking a 0.12% increase for the day. Despite expectations of further monetary tightening by the Bank of Japan (BoJ), the EUR/JPY pair remained buoyant due to uncertainty surrounding the European Central Bank (ECB) policy outlook. The BoJ's monetary policy decision is expected on Friday, with markets fully pricing in a 25-basis-point (bps) rate hike this week and another increase in December.
BoJ official Kazuyuki Masu indicated last week that underlying inflation is nearing the central bank's 2% target, and the policy rate is below its neutral level. A rate hike would bring the policy rate to 1.25%, a level last seen in April 1995. The ECB raised its key interest rates last week, but provided no clear guidance on future monetary policy.
ECB President Christine Lagarde stated that discussions focused on the decision made and the Governing Council did not debate the future rate path. Peter Kazimir, a member of the ECB Governing Council, expressed growing concerns about gas and power prices, hinting at potential further action by the ECB. Investors will closely monitor BoJ Governor Kazuo Ueda's press conference for clues about future rate hikes and the pace of tightening.
The divergence between a BoJ continuing its tightening cycle and an ECB providing no clear policy guidance could drive EUR/JPY.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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