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- EUR/JPY advances as the Japanese Yen weakens as the BoJ left its key interest rate unchanged at 0.5% on Thursday.
- The BoJ also lowered its median core CPI forecast for fiscal 2026 to 1.7%, down from 2.0% in January.
- Markets have largely priced in a 25 basis point rate cut by the European Central Bank (ECB) at its June meeting.
EUR/JPY halts its three-day losing streak, rebounding to around 162.50 during Asian trading hours on Thursday. The recovery in the currency cross comes as the Japanese Yen (JPY) weakens across the board, following the Bank of Japan’s (BoJ) widely expected decision to maintain its policy rate.
As anticipated, the BoJ left its key interest rate unchanged at 0.5% on Thursday amid lingering uncertainty over US tariffs. In its policy statement, the central bank reiterated its commitment to gradually raise interest rates if the economy and inflation progress in line with projections.
Notably, the BoJ revised its median core CPI forecast for fiscal 2026 to 1.7%, down from 2.0% in January. However, it maintained that inflation is likely to hover around its 2% target during the latter half of the projection period through 2027.
Attention now turns to the post-meeting press conference, where comments from BoJ Governor Kazuo Ueda will be closely watched for insights into the future path of rate hikes, which could significantly influence JPY movement in the near term.
Adding to the JPY’s weakness, earlier remarks from US President Donald Trump sparked renewed optimism over a potential easing in US-China trade tensions. This, in turn, weighed on demand for traditional safe-haven assets like the Yen.
Meanwhile, the Euro (EUR) trades with caution following the release of soft preliminary April Harmonized Index of Consumer Prices (HICP) data from Germany and France, alongside stable readings from Italy and Spain. The inflation data suggest moderate price pressures across the Eurozone’s largest economies, reinforcing expectations of further policy easing from the European Central Bank (ECB).
Markets have nearly priced in a 25 basis point rate cut at the ECB’s June policy meeting, with officials projecting further declines in inflation and economic activity in response to recent US-imposed tariffs on trading partners.
