Bank Of Japan Decision In Focus
BoJ Governor Kazuo Ueda said underlying inflation is moving towards the 2% target, and policy will be set to deliver stable and sustainable inflation. Attention remains on Thursday’s BoJ decision. The euro found support as oil prices eased after several tankers passed safely through the Strait of Hormuz. Markets also expect major economies to release petroleum reserves to offset possible supply disruption. Focus also turns to the European Central Bank on Thursday, where the Main Refinancing Rate is expected to stay at 2.15%. Money markets fully price in a rate rise by July. In 2022, the euro accounted for 31% of global FX transactions, with average daily turnover above $2.2 trillion. EUR/USD makes up about 30% of all trades, followed by EUR/JPY at 4%, EUR/GBP at 3%, and EUR/AUD at 2%.Strategy Considerations For The Weeks Ahead
The EUR/JPY cross is trading around 185.50, a very different environment from what we saw in 2025. Last year, the Bank of Japan was holding steady while the European Central Bank was still considering hikes. Now, the dynamic is shifting, and we must adapt our positions for the coming weeks. The Bank of Japan finally ended its negative interest rate policy last week, moving its key rate to 0.10% for the first time since 2007. This historic shift comes as Japan’s core inflation has stayed above the 2% target for nearly two years, hitting 2.8% in the latest reading for February. Despite this hike, the Yen remains weak, so we must still watch for verbal and physical intervention from Japanese authorities. On the other side, the European Central Bank is holding its main rate at 4.0%, but the conversation has turned to rate cuts. With the latest Eurozone inflation data showing a decline to 2.6%, money markets are pricing in a 75% chance of a first rate cut by June. This contrasts sharply with the mood in 2025 when the market was still anticipating further tightening from the ECB. We should also remember that the tailwind from falling oil prices that supported the Euro last year has reversed. Crude oil is now hovering around $85 a barrel due to persistent supply concerns, which pressures the energy-importing Eurozone economy. This higher cost of energy could limit the Euro’s upside potential against the Yen. For derivative traders, this fundamental shift suggests the long EUR/JPY trend is losing momentum. The once-widening interest rate gap is now set to narrow, making long positions less attractive. We should consider buying put options or establishing bear put spreads to protect against a potential downturn in the pair over the next month. Create your live VT Markets account and start trading now.
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