During the early European session on Thursday, the EUR/JPY cross is trading with a slight negative bias around 163.75, as fears of foreign exchange intervention by Japanese authorities weigh on the market sentiment.
Japan’s Chief Cabinet Secretary, Yishimasa Hayashi, stated on Thursday that no options would be ruled out to address excessive foreign exchange movements, indicating a readiness to intervene if necessary. This verbal intervention aligns with the recent statement from top currency diplomat Masato Kanda, who expressed intentions to respond to disorderly FX fluctuations. The anticipation of FX intervention from Japanese authorities is likely bolstering the Japanese Yen (JPY) and restraining the upward momentum of the EUR/JPY cross in the short term.
On the European front, speculations about a potential interest rate cut by the European Central Bank (ECB) in June are exerting downward pressure on the Euro (EUR) against the JPY. ECB official Yannis Stoumaras suggested a higher probability of a rate cut in June, while Bank of Italy Governor Fabio Panetta emphasized the ECB’s inclination towards a rate cut due to rapidly easing inflation, nearing the 2% target.
In the upcoming sessions, market participants will closely monitor the release of German Retail Sales data, expected to show a 0.8% year-on-year decline in February. Additionally, the German Unemployment Change and Italian Producer Price Index (PPI) will be released, providing further insights into the economic landscape. On Friday, attention will shift to the Tokyo Consumer Price Index (CPI) for March, with stronger-than-expected data potentially strengthening the JPY against the EUR.
