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Market Analysis

Ahead of the ECB decision, the EUR/JPY pares some of its intraday gains and rises slightly to about 157.00
Amos Simanungkalit · 18.2K Views

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The EUR/JPY pair finds some positive momentum on Thursday, continuing to recover from the over one-month low of around 155.45 reached the previous day. However, spot prices have slightly retreated from the daily high and are currently hovering near the 157.00 level, as investors await the European Central Bank's (ECB) interest rate decision for further direction.

The ECB is expected to announce a 25 basis point rate cut at the conclusion of its September policy meeting, marking the second adjustment in its current easing cycle. However, the market's attention will likely be focused on updated economic forecasts and future policy guidance. Additionally, ECB President Christine Lagarde’s remarks during the post-meeting press conference will play a key role in influencing the euro and determining the short-term outlook for the EUR/JPY pair.

Ahead of this crucial central bank event, Japan's softer-than-expected Producer Price Index (PPI) reading has weakened hawkish expectations from the Bank of Japan (BoJ), contributing to some selling pressure on the Japanese Yen (JPY). The headline PPI figure dropped by 0.2% in August, while the annual rate slowed more than expected to 2.5% from 3.0% in July. Along with a generally upbeat tone in equity markets, this has reduced demand for the safe-haven JPY and provided support for the EUR/JPY pair.

Nonetheless, comments from BoJ board member Naoki Tamura, who mentioned that the timeline for exiting the current easy policy is still long, reinforced expectations that the central bank may raise interest rates later this year. This contrasts with the dovish stance anticipated from the ECB, which could limit JPY losses. As such, it may be wise to wait for stronger buying signals before confirming that the EUR/JPY pair has reached a bottom.

 

 

 

 

Paraphrasing text from "FX Street" all rights reserved by the original author.

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