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Euro slightly lower versus yen as ECB tightening expectations persist
EUR/JPY is around 185.8, while a Reuters poll expects the ECB to keep its deposit rate at 2.25% in July and deliver another hike later this year.
EUR/JPY was trading around 185.8 on Thursday, edging slightly lower after hitting a one month high earlier this week, according to FXStreet.
The slight euro retreat comes as the Japanese yen regains some footing amid renewed hostilities involving Iran that have pushed oil prices higher, lifting risk aversion and supporting JPY. However, euro support remains intact as investors continue to expect additional monetary tightening from the European Central Bank.
FXStreet notes that ECB officials have reiterated they would tighten further if inflation risks intensify. Austria’s central bank governor and ECB Governing Council member Marin Kocher said the ECB is ready to act if second round inflation effects emerge, while Bundesbank President and ECB Governing Council member Joachim Nagel said it remains appropriate to act decisively if needed.
A Reuters poll cited by FXStreet shows most economists expect the ECB to leave its deposit rate unchanged at 2.25% at the July meeting, with roughly 70% anticipating one more rate hike before year end, most likely in September. In Japan, doubts about the government plan to repatriate part of overseas GPIF investments have also weighed on the yen, though Japan’s finance minister said authorities are prepared to intervene if necessary without commenting on specific levels.