The EUR/JPY currency pair encountered selling pressure, dipping to around 162.15 during the early European session on Monday. The dovish sentiment from European Central Bank (ECB) officials continues to weigh on the Euro (EUR) against the Japanese Yen (JPY). Investors are looking ahead to ECB President Christine Lagarde’s speech on Tuesday for potential market-moving insights.
Speculation is growing that the ECB may expedite its policy easing, which could further exert downward pressure on the Euro. At its October meeting, the ECB reduced the deposit rate by an additional 25 basis points. In a recent press conference, President Lagarde acknowledged that there are “probably” more risks to the downside than the upside concerning the ECB’s inflation forecast. She also noted that the central bank would refrain from committing to a specific rate path and would evaluate all available data before making decisions in December.
In contrast, Japanese authorities’ verbal interventions are providing support for the Yen. On Friday, Japan’s top currency diplomat, Atsushi Mimura, emphasized that officials would monitor foreign exchange movements with heightened urgency.
However, uncertainty surrounding the timing and pace of future rate hikes by the Bank of Japan (BoJ) may limit the Yen’s upside potential while offering some support for the EUR/JPY cross. BoJ policymaker Seiji Adachi mentioned last week that the central bank needs to increase interest rates at a “very moderate” pace to avoid premature hikes.
As traders navigate these developments, market focus will remain on the interplay between ECB policies and Japanese economic indicators, particularly ahead of Lagarde’s upcoming address.
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