EUR/JPY faces pressure around 156.50 despite ECB preparing for more interest rate hikes

The EUR/JPY pair is maintaining an auction above the crucial resistance of 156.00 in the early European session. The cross is holding strong as the European Central Bank (ECB) is preparing for more interest rate hikes.

Inflationary pressures in Eurozone have softened as prices of fuel have fallen, however, core inflation has consistently remained stubborn. ECB policymakers are uncomfortable with elevated wage pressures and keeping demand for core goods and services higher. To tame red-hot inflation, ECB President Christine Lagarde has already announced that two more interest rate hikes are appropriate.

Currently, interest rates by the ECB are standing at 4%, and further policy-tightening later this month cannot be ruled out.

Meanwhile, a bold statement has come from Governing Council member and Bank of Portugal Governor, Mario Centeno over inflation guidance. ECB Centeno expects Eurozone “inflation under 3% by the end of 2023.” He further added inflation is coming down faster while the Eurozone labor market is the strongest it has ever been.

On the Tokyo front, the Japanese yen is losing strength as the Bank of Japan (BoJ) has not intervened yet in the currency market despite expectations. Earlier, a poll from Reuters showed that BoJ and other Japanese officials could intervene in the FX domain if the Japanese Yen depreciates to 145.00 against the US Dollar.

Japan’s Current Account data has registered a surplus straight for four months. The current account surplus soared to 1.86 trillion yen in May vs. 773 billion yen reported in the same month a year ago.