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17/09/24
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EUR/JPY Faces Selling Pressure Amid Diverging Central Bank Policies
The EUR/JPY currency pair faced renewed selling pressure on Tuesday, interrupting its recovery from a recent one-month low. The ongoing divergence in monetary policy outlooks between the Bank of Japan (BoJ) and the European Central Bank (ECB) continues to weigh on the pair, causing traders to adopt a cautious stance ahead of the upcoming BoJ meeting.
After a brief uptick during the Asian trading session to around 157.10, the EUR/JPY pair struggled to maintain its slightly upward trajectory, which had emerged from the substantial low of 155.00, marking its lowest level since August. By the last hour of trading, spot prices had retreated to the region of 154.25-154.20, signaling the potential for a continuation of the downturn observed over the prior two weeks.
The Japanese Yen is benefiting from recent hawkish indications from BoJ officials, suggesting a likely increase in interest rates by year-end. The current climate of uncertainty surrounding central bank decisions contributes to the Yen’s attractiveness as a safe-haven currency, thereby exerting downward pressure on the EUR/JPY cross.
Attention now turns to critical policy announcements from the U.S. Federal Reserve, which will conclude a two-day meeting on Wednesday, followed by an update from the Bank of England. However, the spotlight is firmly on the anticipated BoJ policy decision on Friday, which is expected to significantly impact the JPY’s near-term price movements and shape the future direction of the EUR/JPY pair.
Additionally, the prevailing softness in the US Dollar, driven by expectations of substantial rate cuts from the Federal Reserve, may provide some support for the Euro. This could deter traders from taking aggressive bearish stances against the EUR/JPY pair, thereby limiting further declines. Nonetheless, the contrasting policy trajectories of the BoJ and ECB suggest that the most likely path for the Euro will be downward in the near future. Recent decisions by the ECB to reduce interest rates indicate a commitment to lower borrowing costs, although insights suggesting a less imminent rate cut might offer some support for the Euro in upcoming trades.
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