• EUR/JPY recovered its intraday losses before the ECB policy decision.
• ECB is expected to keep the deposit rate unchanged at 4.0%.
• ECB might have intervened in the FX market to support the Japanese Yen.

EUR/JPY cross has almost recovered its intraday losses, struggling below the session’s opening bid at 158.71 during the European trading hours on Thursday. The cross receives upward support ahead of the Monetary Policy Statement from the European Central Bank (ECB) due to be released later in the day.

This Eurozone’s inflation levels surpass the ECB’s target and mounting concerns about the risk of a slowdown or stagflation in the European zone. Hence, the ECB is expected to discontinue further policy tightening, which puts pressure on the Euro.

ECB President Christine Lagarde on Wednesday emphasized that underlying inflation remains sturdy, and wage growth is sustaining historically high levels. This could play a significant role in shaping the ongoing narrative influencing the performance of the Euro.

Investors will shift their attention to the Tokyo Consumer Price Index (CPI) and Core CPI for October on Friday, seeking the potential impact on market sentiment concerning the inflation scenario in Japan.

The Yen exhibited improvement against the US Dollar during the European session, but the extent and rapidity of the decline raise suspicions, prompting consideration that it might make more sense for Tokyo to intervene.

Earlier in the day, Japan’s Deputy Chief Cabinet Secretary Murai Hideki took center stage, communicating through Reuters that maintaining stable currency movements aligned with fundamentals is of utmost importance. He voices dissatisfaction with excessive foreign exchange (FX) volatility and maintains silence on the topic of currency intervention. Hideki underscores a commitment to taking fully appropriate measures in handling FX matters.

EUR/JPY: ADDITIONAL LEVELS TO WATCH