EURJPY Can Move on ECB Minutes and Japanese Inflation

EURJPY will have minutes of the recent ECB policy meeting and Japanese inflation reading to digest.

We look at the critical levels for the rest of the week and highlight the key issues to look for in the economic data.

EURJPY – Daily Chart

EURJPY – Daily Chart

EURJPY rallied to almost 142 yesterday but has since dropped to around 139.15. The key support level for the eur v jpy is at 137.35, which can be an area to watch in the upcoming sessions. 

The Bank of Japan wrong-footed economists once again as it stayed firm in its Yield Curve Control. Analysts at some of the largest banks, such as Citi, said that the YCC policy would be terminated at yesterday’s interest rate decision. The BOJ also kept rates unchanged at -0.1%, which was widely expected. 

“Japan’s economy, despite being affected by factors such as high commodity prices, has picked up as the resumption of economic activity has progressed while public health has been protected from Covid-19,” the central bank said slowdowns in other economies could create downward pressure on growth. 

“Uncertainty regarding Japan’s economy is very high. It’s necessary to support the economy with our stimulus policy, to ensure companies can raise wages,” Kuroda said. “By maintaining an ultra-easy policy, we will strive to achieve our price target stably and sustainably accompanied by wage hikes.” 

Kuroda added that he expects the core consumer inflation figure to slow below 2% toward the end of the second half of 2023. After a decade, the BOJ governor will also step down in April, which could add some uncertainty to the yen in the coming months. 

The European Central Bank will publish the minutes from its recent policy meeting tomorrow. A dovish outlook could lead to further lows in the euro. The Japanese inflation rate will also be essential as the rate has been steadily climbing to 3.8%, and there has been no attempt to rein it in. Companies are also predicted to hike wages in the annual Spring negotiations.

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