- EUR/JPY has slipped sharply after failing to cross the critical hurdle of 144.00.
- ECB Lagarde may hike the interest rates by 75 bps to tame soaring price pressures.
- An upbeat Japanese GDP data has strengthened the yen bulls.
The EUR/JPY pair has picked significant offers after attempting to cross the critical resistance of 144.00 in the early Tokyo session. The cross has turned imbalance on the downside after a break of the inventory distribution in a 143.78-144.33 range in which institutional investors distribute their asset inventories to the retail participants. The asset is expected to remain volatile as investors are focusing on the interest rate decision by the European Central Bank (ECB).
Soaring energy prices in eurozone have resulted in higher energy bills, inflation rate, and a deepening energy crisis. After the gas supply was cut off from Russia citing western sanctions responsible for an unexpected halt, the energy crisis deepened further. Apart from that, the Harmonized Index of Consumer Prices (HICP), ECBs preferred inflation indicator, is skyrocketing, and growth prospects are vulnerable amid regional imbalance.
Considering the varied catalysts, the ECB is needed to take necessary precautions before hiking the interest rates. As per the expectations, ECB President Christine Lagarde will elevate the interest rates by 75 basis points (bps) to 1.25%.
On the Tokyo front, an unscheduled meeting of Japan’s Ministry of Finance with the Financial Services Agency (FSA), and the Bank of Japan (BOJ) has created anxiety for market participants. It is highly likely that the officials will discuss containing the Japanese yen from more carnage. A weaker yen is helping to accelerate export numbers, however, its repercussions are impacting corporate margins.
Earlier today, the Japanese Cabinet Office released the Gross Domestic Product (GDP) data. Japan’s GDP data landed higher than expectations significantly. The economic data improved meaningfully to 3.5% against the expectations and the prior print of 2.9% and 2.2% respectively on an annual basis. Also, the quarterly data has been recorded higher at 0.9% against the forecasts of 0.7% and the prior release of 0.5%.
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