- EUR/JPY fell after the European Central Bank cut interest rates again later on Thursday.
- Uncertainty and positive risk from the Bank of Japan kept a lid on yen movement, providing support to EUR/JPY.
- Investors are eagerly awaiting the European Central Bank’s interest rate decision and policy details.
The EUR/JPY cross attracted fresh sellers in the Asian session on Thursday, with bears eyeing a move below 162.00 before preparing to extend the recent pullback from 163.55-163.60 levels.
Stability expectations continued to weigh on the euro after the European Central Bank (ECB) cut its deposit rate by 25 basis points for the first time in 13 years today. That may reflect the ECB’s urgent warning to tighten monetary policy in the face of financial shocks and signs of economic weakness in the euro zone. At the same time, rising geopolitical tensions in the Middle East and the risk of war in the broader region have led some safe-haven capital to flow into the yen. That’s adding to the tone of the EUR/JPY cross.
Meanwhile, data from Japan’s Finance Ministry on Thursday showed total exports fell for the first time in 10 months in September, adding to concerns about weak global energy demand. The prospect plays into the Bank of Japan’s (BOJ) plan to exit last year’s loose monetary policy amid Prime Minister Shigeru Ishiba’s reluctance to raise interest rates. That will discourage yen bulls from making aggressive bets and help prevent further losses in the EUR/JPY cross, which faces risks from the main bank layer Nature.
Investors will closely follow the latest economic forecasts as well as the general interest rate cut decision. This situation, together with the speech of ECB President Lagarde at the meeting after the meeting, will affect the market’s expectations regarding monetary policy and the euro in 2025. In addition, the development of the playing field plays a key role in increasing safe haven demand. For the yen, this situation will allow traders to seize the short-term opportunity for the EUR/JPY transition.
