The EUR/JPY pair is steady at around 181.10, as traders await the Eurozone Retail Sales data. This stability follows comments from BoJ Governor Ueda, hinting at possible support for the Yen from a rate hike at the BoJ’s next meeting. Currently, there’s an 80% chance the BoJ will raise rates in December. Meanwhile, a surprise increase in Eurozone inflation for November lowers the odds of further cuts from the ECB, which helps support the Euro. The ECB has kept its interest rates unchanged, with the deposit rate at 2.00%.

ECB’s Cautious Approach

The ECB is taking a careful stance, relying on data for future monetary decisions. The upcoming Eurozone Retail Sales report, expected to show a 1.4% rise for October, could sway the EUR/JPY direction. A stronger-than-expected result would boost the Euro, while a weaker result might hurt it against the Yen. The Japanese Yen’s value is affected by its economy, BoJ policies, differences in bond yields between the US and Japan, and global risk sentiment. Recently, the BoJ’s long-standing policy of currency devaluation has faced challenges, as it shifts toward reducing the gap with other central banks, giving support to the Yen. We see the EUR/JPY pair remaining around 181.00, but this stability might be short-lived. Attention is on the Bank of Japan’s next policy meeting, where expectations for a rate hike have grown significantly. This potential for a stronger Yen is a key focus for traders in the coming weeks.

Potential Impact of BoJ Rate Hike

Market swaps indicate an 80% chance the BoJ will raise its policy rate from 0.10% during the December meeting. This comes after a long stretch of loose policies ending when the BoJ abandoned negative rates in early 2024. The move follows strong economic data, as Japan’s core inflation has stayed above the bank’s 2% target for over a year, with October 2025’s rate hitting 2.9%. We don’t expect the ECB to weaken the Euro, as it seems to have finished cutting rates from the current 2.00% deposit facility. The Eurozone’s inflation data from November 2025 unexpectedly increased to 2.5%, making more cuts by the ECB unlikely. Today’s retail sales figures will be a crucial test, and missing the expected 1.4% rise could drag on the Euro. For traders in derivatives, this scenario suggests preparing for a possible decline in EUR/JPY or increased volatility. Buying put options on EUR/JPY directly positions traders to profit from a stronger Yen if the BoJ raises rates. There are also opportunities in strategies that benefit from significant price swings in either direction, such as buying straddles before central bank announcements. Create your live VT Markets account and start trading now.

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