- EUR/JPY continues to rise after the release of the final Eurozone inflation data as it shows no change from expectations.
- Comments by Japan's Chief Cabinet Secretary suggest that authorities may be moving closer to foreign exchange market intervention.
- Further comments from ECB speakers could lead to fluctuations in EUR/JPY.
EUR/JPY rose more than a tenth of a percent on Wednesday, trading in the mid-164.00 yen range. The movement in this currency pair appears to have been primarily driven by a combination of euro zone inflation data and comments from Japanese government officials aimed at supporting the Japanese yen (JPY).
The euro/yen pair rose following Eurostat's announcement of the final Eurozone Harmonized Consumer Price Index (HICP) for March. Final estimates were unchanged from the initial release, which saw HICP increase 2.4% year-over-year and core HICP increase 2.9%. This also means that both measures are still below last month's 2.6% and 3.1% respectively.
Although the data showed no change, the euro (EUR) rose in most pairs after the announcement, probably due to lower market expectations. Recent dovish comments from European Central Bank (ECB) officials, suggesting an increased appetite for rate cuts due to falling inflation and stagnant growth, may have contributed to the lower outlook. There is.
For example, on Tuesday, ECB President Christine Lagarde said barring a surprise, the ECB would soon cut interest rates, and said the ECB was keeping a close eye on oil prices due to tensions in the Middle East.
The euro/yen pair's upside was likely capped by comments from Japan's Chief Cabinet Secretary Yoshimasa Hayashi, who made a verbal intervention to support the yen on Wednesday. Hayashi said, “We are closely monitoring exchange rate trends,'' and “we are prepared to take all possible measures.''
This may indicate that Japanese authorities are seriously considering directly intervening in the currency market by selling foreign exchange reserves and buying yen in order to strengthen the yen. The ripple effects of such intervention will be felt most noticeably in USD/JPY, but will likely result in a depreciation in EUR/JPY.
His intervention may have come in response to recent comments from Federal Reserve Chairman Jerome Powell, who said, “Recent data indicates no further progress on inflation this year.'' “If inflation continues to rise, the Fed could maintain current interest rates for as long as necessary.'' ”
His comments led to a rise in the U.S. dollar, as keeping interest rates high tends to be good for currencies. This is due to an increase in the inflow of foreign capital. Following Chairman Powell's remarks, USD/JPY rose to over 154.00. This is above 150.00, the ideal standard for Japanese people to dislike devaluation of their currency.
A series of speeches on Wednesday by key ECB members, including ECB Board Member Piero Cipollone, ECB Board Member Isabel Schnabel, and President Christine Lagarde herself, could also have an impact on euro/yen volatility.
Japan's trade statistics released last night had little impact on the exchange rate. According to the data, exports continued to grow by more than 7.0% year-on-year in March, but only slowed slightly, with imports down 4.9% (after increasing 0.5% in the previous month) and the trade balance in surplus. Ta. The deficit was 366.5 billion yen, up from a deficit of 377.8 billion yen in February.
