EUR/JPY senses heat around 145.00 as street sees further tweaks in Japan’s YCC

EUR/JPY senses heat around 145.00 as street sees further tweaks in Japan’s YCC

  • EUR/JPY has sensed selling pressure around 145.00 amid rising bets for the expansion of JGBs’s yields cap.
  • BoJ Ueda has already conveyed that Japanese inflation is coming from international forces and is not growing domestically.
  • A recovery in German Retail Sales might propel inflationary pressures.

The EUR/JPY pair has faced barricades around 145.00 after a recovery move in the Tokyo session. It looks like the cross has retreated on expectations that Bank of Japan (BoJ) Governor Haruhiko Kuroda could tweak the Yields Curve Control (YCC) on Japanese Government Bonds (JGBs), in his last monetary policy announcement.

A power-pack action is expected from the Japanese Yen as investors will keenly watch BoJ Kuroda last time dictating the monetary policy. Harsh struggles in lifting the labor cost index and spurting growth rates by the Japanese economy might compel the BoJ to sound dovish on interest rates. A continuation of an ultra-loose monetary policy is expected as Tokyo inflation showed a steep decline in January.

BoJ Governor Nominee Kazuo Ueda has already conveyed that inflationary pressures in the Japanese economy are coming from international forces and are not growing domestically. Therefore, the maintenance of an expansionary monetary policy is highly expected.

Over yield cap, Reuters reported that “With rising inflation pushing up long-term interest rates, some investors bet the BOJ may tweak yield curve control (YCC), such as by raising the 10-year yield cap, as early as next week’s policy meeting.”

On the Eurozone front, the Euro is likely to dance to the tunes of German Retail Sales data. The monthly data is expected to deliver an expansion by 2.0% vs. a contraction of 5.3% released earlier. The release of the same will clear that retail demand is recovering again and could spurt inflation ahead.

European Central Bank (ECB) policymaker and Spanish central bank head Pablo Hernandez de Cos said on Tuesday, “Spanish core CPI is to remain high in the short term, then gradually decline.” This could force ECB President Christine Lagarde to go strong for interest rates beyond March.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.