Euro Strengthens Against Yen as ECB and Bank of Japan Display Divergent Monetary Policies

The euro has risen against the yen for the third consecutive session in European trading, driven by the differing outlooks for central banks in Japan and Europe.

Arslan Butt•Tuesday, April 11, 2023•2 min read

The euro has risen against the yen for the third consecutive session in European trading, driven by the differing outlooks for central banks in Japan and Europe. The European Central Bank (ECB) is anticipated to progressively raise interest rates in the coming months.

On the other hand, Bank of Japan’s new governor, Kazuro Ueda, has confirmed his commitment to the ultra-easy monetary policy of his predecessor and dismissed the possibility of significant rate hikes.

EUR/JPY increased by 0.5% to 144.70, with a session-low at 143.80, after climbing 0.1% on Friday, marking the second consecutive gain and resuming its ascent following a brief pause from three-month highs at 145.67.

Recent robust European data indicates the economy has performed better than anticipated in the first quarter, setting the stage for further policy tightening by the ECB.

ECB President Christine Lagarde stated that the bank still has much to do and will rely on data to make future policy decisions, adding that inflation remains elevated in the eurozone.

New Bank of Japan Governor Kazuo Ueda began his term on Monday, reaffirming the bank’s dedication to relaxed monetary policies.

Ueda highlighted the ongoing challenge of extending monetary easing while promising to build on previous policies. He also noted that the Bank of Japan’s existing monetary incentives helped Japan recover from recession.

Ueda stated that significant rate hikes are not feasible in Japan under current conditions and that financial markets are beginning to regain stability.

EUR/USD Technical Outlook

The EUR/USD pair concluded yesterday below the intraday bullish channel’s support line, indicating an anticipated negative pressure in the upcoming sessions. The main target is a visit to the 1.0745 level.

As a result, a bearish bias is expected for today, reinforced by being below the EMA50. However, breaching 1.0915 would halt the predicted decline and return the price to the bullish trajectory, aiming for positive targets starting with 1.1032.

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ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.