The EURJPY pair will be in focus into the weekend with ECB minutes and Japanese inflation.
EURJPY – Weekly Chart
The EUR/JPY exchange rate has resistance at the 148.40 level. The upcoming data should test that level for a breakout or reversal.
The European Central Bank releases monetary policy meeting accounts on Thursday. Financial markets are convinced that the European Central Bank will keep raising interest rates to tackle inflation, despite the recent banking sector problems.
The crisis was expected to slow credit growth and the economy, allowing policymakers a chance to pause. However, Goldman Sachs Group has reinstated its forecast for a terminal rate of 3.75% after lowering it to 3.5% amid the banking pressures.
“Focus has quickly returned to the risks of stubborn inflation,” said Tanvir Sandhu, chief derivatives strategist at Bloomberg Intelligence. He expects the chances of a 3.75% peak rate to have more than doubled since the bank crisis.
EURJPY Forecast
Money market bets see the ECB raising rates by a quarter-point in May, June and July. “Given the very large increase in inflation, it has been important to raise interest rates quite a bit,” said Philip Lane, Chief Economist at the ECB. “On rates, more increases are expected and markets expect that rates will remain relatively high for the next number of years”.
The interest rate moves by the ECB are driving the euro higher versus the Japanese yen as the new governor of the BOJ has no plans to exit the loose policy of his predecessor. That could see the euro push higher if Japan’s inflation falls for a second month. Traders should be on the lookout for oil price pressures after the recent OPEC cut.
