The European Central Bank (ECB) is expected to cut rates by 25 bps today, lowering the deposit rate to 2.00%. While this move is largely priced in, what matters for markets—especially EUR/JPY—is the forward guidance.
Relevance to EUR/JPY:
Rate Cut = EUR Bearish: Lower rates reduce euro appeal, especially vs. the yen, which is still heavily influenced by the Bank of Japan’s ultra-loose policy. A clear ECB dovish tone may weigh on EUR/JPY.
ECB Caution May Limit EUR Downside: If the ECB signals it's nearing the end of cuts or expresses concern over sticky inflation, it could support EUR. This would limit downside in EUR/JPY or even trigger a rebound.
BOJ Policy Still Ultra-Loose: Japan’s rates remain near zero, and unless the BOJ surprises with a hawkish shift (unlikely short term), EUR/JPY is more likely to react to ECB tone than BOJ policy.
Risk Sentiment Matters: EUR/JPY often tracks risk appetite. If markets interpret the ECB cut as growth-supportive, and global equities rise, EUR/JPY could hold firm or climb despite the rate cut.
Trading Implications
Dovish ECB = EUR/JPY downside, especially if markets price in more cuts.
"One-and-done" message = EUR/JPY support or slight upside.
Watch for BOJ comments or risk sentiment shifts to fine-tune positioning.
Relevance to EUR/JPY:
Rate Cut = EUR Bearish: Lower rates reduce euro appeal, especially vs. the yen, which is still heavily influenced by the Bank of Japan’s ultra-loose policy. A clear ECB dovish tone may weigh on EUR/JPY.
ECB Caution May Limit EUR Downside: If the ECB signals it's nearing the end of cuts or expresses concern over sticky inflation, it could support EUR. This would limit downside in EUR/JPY or even trigger a rebound.
BOJ Policy Still Ultra-Loose: Japan’s rates remain near zero, and unless the BOJ surprises with a hawkish shift (unlikely short term), EUR/JPY is more likely to react to ECB tone than BOJ policy.
Risk Sentiment Matters: EUR/JPY often tracks risk appetite. If markets interpret the ECB cut as growth-supportive, and global equities rise, EUR/JPY could hold firm or climb despite the rate cut.
Trading Implications
Dovish ECB = EUR/JPY downside, especially if markets price in more cuts.
"One-and-done" message = EUR/JPY support or slight upside.
Watch for BOJ comments or risk sentiment shifts to fine-tune positioning.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.