• EUR/JPY is oscillating in a narrow range below 150.00 as ECB/ BoJ policy has come under the spotlight.
• ECB Lagarde would raise rates to 4% despite galloping signs of a recession in the Eurozone.
• The BoJ might let the monetary policy unchanged as inflation is need to remain above 2% steadily.

The EUR/JPY pair is displaying a back-and-forth action below the psychological resistance of 150.00 in the early European session. The cross is struggling to find directions as investors have been sidelined ahead of the interest rate decision by the European Central Bank (ECB) and the Bank of Japan (BoJ), which will be announced this week.

An interest rate hike of 25 basis points (bps) by the ECB to 4% is widely anticipated by the market participants despite deepening signs of recession in the Eurozone. The final reading of Q1 Gross Domestic Product (GDP) contracted by 0.1%. Investors should note that factory activities in the shared continent are constantly declining, which bolsters the odds of further contraction in GDP figures.

Investors should note that the German economy has already registered a recession after reporting two consecutive quarters of contraction.

However, ECB President Christine Lagarde has no other option than to raise interest rates further despite fears of recession. The inflation rate in Eurozone is at 6.1%, which is three times more than the desired rate. Also, severe persistence in core inflation advocates the need for more interest rates.

On the Japanese Yen front, investors are hoping that the Bank of Japan (BoJ) will not make any adjustments in the current ultra-dovish stance. BoJ Governor Kazuo Ueda has made clear that achievement of stable inflation above 2% is highly required, which could be achieved by pushing wages higher bolstering the overall demand.

Investors should be aware that the majority of inflation in Japan is being contributed by higher import prices, which is ineffective to keep inflation comfortable above 2%.

Meanwhile, BoJ policymaker Masazumi Wakatabe said in a Bloomberg TV interview early Monday, “The communication would be very interesting” at the upcoming policy meeting this Friday. He further added, “It’s still too early to call that this inflation has been sustainable and stable.”

EUR/JPY