Euro advances against Japanese Yen despite BoJ rate hike expectations
- EUR/JPY edges higher on Monday as investors brace for a major monetary policy decision in Japan.
- Markets fully price in a 25-basis-point Bank of Japan rate hike this week, with another increase potentially coming in December.
- The European Central Bank remains cautious about the rate path, while Peter Kazimir expresses concerns over energy prices.
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.
On the Japanese front, attention turns to the BoJ monetary policy decision due on Friday. Markets fully price in a 25-basis-point (bps) rate hike this week and also anticipate another increase in December.
Expectations of more aggressive monetary tightening in Japan strengthened after comments from BoJ official Kazuyuki Masu, who said last week that underlying inflation is approaching the central bank’s 2% target and that the policy rate remains below its neutral level.
With underlying inflation converging toward the 2% target, the Japanese central bank is therefore expected to raise its policy rate at its September meeting to address upside risks to prices. Such a move would bring the policy rate to 1.25%, a level last seen in April 1995.
Investors will closely monitor the press conference of BoJ Governor Kazuo Ueda for indications about the pace of future rate hikes and how far the central bank could raise rates during the current tightening cycle. A more hawkish message could support the Japanese Yen (JPY) and limit the upside in EUR/JPY.
On the European front, the ECB raised its key interest rates last week, in line with expectations, but provided no meaningful guidance on the future path of monetary policy.
ECB President Christine Lagarde said at her press conference that discussions had focused on the decision taken at the meeting and that the Governing Council had not debated the future rate path. She also stressed that it was impossible to anticipate the next move.
On Monday, Peter Kazimir, a member of the ECB Governing Council and Governor of the National Bank of Slovakia (NBS), said he was “increasingly concerned about gas and power prices.” He added that the ECB would consider all options at its next policy decision and would act if necessary.
The potential divergence between a BoJ continuing its tightening cycle and an ECB avoiding clear guidance on its next steps could become an important driver for EUR/JPY. The signals provided by Kazuo Ueda on Friday will therefore be crucial in determining whether the pair can preserve its recent gains.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.52% | 0.35% | 0.62% | 0.20% | 0.63% | 0.78% | 0.32% | |
| EUR | -0.52% | -0.15% | 0.07% | -0.35% | 0.09% | 0.27% | -0.21% | |
| GBP | -0.35% | 0.15% | 0.21% | -0.17% | 0.25% | 0.42% | -0.12% | |
| JPY | -0.62% | -0.07% | -0.21% | -0.42% | 0.02% | 0.16% | -0.34% | |
| CAD | -0.20% | 0.35% | 0.17% | 0.42% | 0.41% | 0.56% | 0.05% | |
| AUD | -0.63% | -0.09% | -0.25% | -0.02% | -0.41% | 0.17% | -0.38% | |
| NZD | -0.78% | -0.27% | -0.42% | -0.16% | -0.56% | -0.17% | -0.53% | |
| CHF | -0.32% | 0.21% | 0.12% | 0.34% | -0.05% | 0.38% | 0.53% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
