- EUR/JPY trades sideways near 162.50 with ECB policy in focus.
- Investors expect the ECB to cut interest rates again by 25 bps.
- The next move in the Japanese Yen (JPY) will be projected by the National CPI data for September.
The EUR/JPY pair trades in a tight range around 162.50 in Thursday’s European session. The cross consolidates as investors have sidelined ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced at 12:15 GMT.
The ECB is widely anticipated to reduce the Rate on Deposit Facility by 25 basis points (bps) to 3.25%. This would be the second consecutive interest rate cut by the ECB in a row.
A shift in focus of ECB officials to economic stagnation in the Eurozone from taming price pressures is the major reason behind firm ECB rate cut bets. The Eurozone economy is going through a rough phase due to weakening demand from domestic and overseas markets. Meanwhile, growing speculation for former US President Donald Trump winning presidential elections, which will take place on November 5 has also dampened the Eurozone’s outlook.
Trump is expected to elevate import tariffs, which could hurt exports from the old continent and make their economic prospects more vulnerable.
Meanwhile, the annual Eurozone Harmonized Index of Consumer Prices (HICP) has decelerated to 1.7% in September, according to the revised estimate.
In the Japanese region, investors await the National Consumer Price Index (CPI) data for September, which will be published on Friday. The inflation data will influence market speculation for the Bank of Japan’s (BoJ) interest rate outlook. Economists expect the National CPI ex Fresh Food to have grown by 2.3%, slower than 2.8% in August.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD clings to recovery gains below 0.6550 on weaker USD, upbeat mood
AUD/USD holds sizeable gains below 0.6550 in the Asian session on Monday. A sharp pullback in the US bond yields prompts some US Dollar profit-taking after US President-elect Trump named Scott Bessent as Treasury Chief. Moreover, the upbeat market mood supports the risk-sensitive Aussie.
USD/JPY remains heavy below 154.00 as USD weakens with Treasury yields
USD/JPY remains under intense selling pressure below 154.00 in the Asian session on Monday. Retreating US Treasury bond yields drags the US Dollar away from a two-year top high and drives flows towards the lower-yielding Japanese Yen, though the BoJ uncertainty could limit losses for the pair.
Gold: Is the tide turning in favor of XAU/USD sellers?
After witnessing intense volatility in Monday's opening hour, Gold's price is licking its wounds near $2,700. The bright metal enjoyed good two-way trades before sellers returned to the game after five straight days.
Elections, inflation, and the bond market
The Federal Reserve believes inflation is no longer a concern for consumers and the time has come to ensure the rate of change of prices does not decline any further.
Read more
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.