The EUR/JPY pair has seen a consistent decline for the second consecutive day, falling to a one-month low of 158.20 during the Asian trading session. Despite a minor recovery, the pair is still down by almost 0.30% for the day, hovering around the mid-158.00s.
One of the key factors leading to this decline is the overall risk-averse sentiment in the market. Investors are turning cautious ahead of the release of US consumer inflation figures, which are expected to have a significant impact on market expectations regarding the Federal Reserve’s rate-cut trajectory. This cautious approach has caused a shift towards safe-haven assets like the Japanese Yen, putting pressure on the EUR/JPY pair.
Another factor influencing the decline is the boost in the Japanese Yen driven by speculations of a rate hike by the Bank of Japan (BoJ). Recent hawkish comments by BoJ board member Junko Nagakawa have added to the strength of the Yen, further weighing on the EUR/JPY pair.
Dovish ECB Expectations
In contrast to the BoJ’s hawkish stance, the European Central Bank (ECB) is expected to adopt a dovish approach at its upcoming meeting. With declining inflation in the Eurozone, the ECB is likely to lower rates once again, contributing to the downward pressure on the EUR/JPY pair.
Market Sentiments
Despite weaker business confidence indicators in Japan, the sentiment remains bearish for the EUR/JPY pair. The near-term bias is tilted towards bearish traders as the JPY continues to attract investors seeking refuge in the current market environment.
The latest data shows that the Japanese Yen has been the strongest against the New Zealand Dollar, highlighting the strength of the JPY amidst market uncertainties. The heat map depicting the percentage changes of major currencies against each other also reflects the prevailing risk-off sentiment, with the JPY gaining ground against its counterparts.
Overall, the EUR/JPY pair is facing significant downward pressure due to a combination of risk aversion, hawkish BoJ expectations, and dovish ECB sentiments. As market uncertainties persist, traders are likely to maintain a cautious approach towards the pair in the near term.