Market Overview
The EUR/JPY exchange rate has seen a resurgence, rallying from a support level of 181.00 to a current trading level of 184.50. This upward movement is attributed to a decrease in expectations regarding imminent rate hikes by the Bank of Japan (BOJ).
Key Developments
Recent reports indicate that Japanese Prime Minister Sanae Takaichi has expressed concerns to the BOJ about the potential for further rate hikes. The BOJ had been considering additional rate increases to combat persistent inflation, but Takaichi's focus on economic stimulus and growth presents a conflicting stance.
As a result, traders have begun to reduce their expectations for rate increases that were anticipated to start in April, leading to a rally in the euro against the yen.
Upcoming Events
Looking ahead, a significant event is scheduled for tomorrow: a speech by outgoing European Central Bank (ECB) President Christine Lagarde at 3:30 PM HKT. Lagarde is expected to leave her position before her term officially ends, with Klaas Knot likely to succeed her, according to a Bloomberg survey of economists.
More than half of the surveyed economists believe Lagarde will step down this year, while less than 30% think she will complete her full eight-year term, which concludes next October. Speculation has arisen that she may resign before the French elections to allow President Emmanuel Macron to assist in selecting her successor.
Market Implications
Despite the uncertainty surrounding Lagarde's potential early exit, it is generally believed that her successor will not significantly alter the ECB's current trajectory. Additionally, a recent U.S. Supreme Court decision that blocks tariffs imposed by former President Trump has put a trade deal on hold, which could further support the euro in the market.