ECB Rhetoric and Yen Weakness - Still room in EURJPY?

asked by u/blee · 2d · 2 answers

Been watching the ECB's subtle but consistent hawkish lean recently, despite some of the softer CPI prints out of the Eurozone. Lagarde and her crew seem to be maintaining a very cautious stance on inflation, which really highlights the divergence from other major central banks that are starting to hint at rate cuts. This sustained hawkishness could certainly provide a floor for the Euro.

On the other side of the pair, the Yen just continues its seemingly endless drift lower. BoJ's ultra-loose policy stance combined with the sheer interest rate differentials makes carry trades very attractive. I've been eyeing $EURJPY, currently trading around 184.60754. While it's already had a significant run, the fundamental tailwinds still appear to be in place. I'm keeping it on my watchlist for any pullback entries, perhaps looking for consolidation around the 183.921 level if we get some profit-taking. Not chasing it up here, but the broader trend seems difficult to argue against without a material shift from either central bank. $EURGBP also holding relatively firm at 0.85664, suggesting underlying Euro strength is fairly broad.

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  • u/zeynep_s· 1 pts· 1d

    That's a good point about the ECB's consistent hawkishness. I wonder if the market has fully priced in that divergence yet, especially given how quickly narratives can shift on central bank policy.

  • u/azhao· 1 pts· 1d

    The ECB's talk is one thing, but actual rate hikes are another. They've been very slow to move in the past, and I'm not convinced their 'hawkish' rhetoric will translate into meaningful action that sustains a huge EURJPY rally, especially if the BoJ ever gets serious.

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