- EUR/JPY gains momentum to near 157.70 in Friday’s Asian session.
- Japan’s core consumer inflation reinforced expectations that the BoJ will keep raising interest rates.
- The ECB’s dovish stance might drag the Euro lower and cap the upside for the cross.
The EUR/JPY cross attracts some buyers to around 157.70 during the Asian trading hours on Friday. The Japanese Yen (JPY) softens after the Japanese policymaker said that higher long-term rates can pressure Japan’s fiscal situation. Investors will take more cues from the preliminary HCOB Purchasing Managers Index (PMI) for February from Germany and the Eurozone, which is due later on Friday.
Japan’s Finance Minister, Katsunobu Kato said early Friday that higher Japanese government bond yields will increase debt-servicing costs, which, in turn, may impact Japan’s finances. The JPY edges lower in an immediate reaction to these remarks.
Nonetheless, Japan’s core consumer inflation hit its fastest pace in 19 months. Data released by the Japan Statistics Bureau on Friday showed that the country’s National Consumer Price Index (CPI) jumped 4.0% YoY in January, compared to the previous reading of 3.6%.
Meanwhile, the CPI ex Fresh food rose 3.2% YoY in January versus 3.0% prior. The figure was above the market consensus of 3.1%. Hotter-than-expected inflation figures strengthened the case for a hawkish outlook on the Bank of Japan (BoJ) monetary policy, which might cap the downside for the JPY.
BoJ Governor Kazuo Ueda signaled his readiness to keep raising rates if wages continue to increase and underpin consumption, thereby allowing firms to keep hiking pay.
The growing speculation of further interest rate reductions from the European Central Bank (ECB) could weigh on the Euro (EUR). Analysts expect the European Central Bank (ECB) to deliver quarter-point cuts at every meeting until mid-2025. That would bring the deposit rate to 2.0%.
