German inflation report will be released on Thursday and could catalyse the EURJPY pair marching higher.
EURJPY – Daily Chart
The pair previously found resistance at the 144 level but now has that barrier in its sights again. The target above there can be the December 2014 high at 149.
“The traditional interest rate… under the current circumstances is the most effective, the most appropriate, and based on the proportionality assessment that we conduct in choosing from the toolbox is the one that actually works best,” ECB Chief Christine Lagarde said in Washington.
Dutch central bank chief Klaas Knot added that the ECB needed at least two more rate hikes of up to 75 basis points before reaching the neutral level. It neither stimulates nor curbs the economy. Higher German inflation could add to that double hike.
Lagarde also said more international cooperation was needed to bring inflation back to the 2% target. Turning her attention to the fiscal policies of some euro nations, she said:
“We’re not exactly operating in a strict parallel, but we have to act cooperatively because if we don’t, then monetary policy will have to be even more determined and more decisive in its fight against inflation.”
The ECB also wants central banks to join forces, with Lagarde saying:
“We need to cooperate among central bankers to understand what the spillovers of domestic policy will be…because financial markets are extremely integrated and because our respective monetary policies have an impact on other countries in the world,” she said.
Meanwhile, Bank of Japan Governor Haruhiko Kuroda still thinks monetary easing is the path ahead for the economy and will continue to support markets. That dynamic can lead to higher prices for the EURJPY.
