FX

EUR/JPY struggles below 143.80 as Eurozone inflation slowdown weakens hawkish ECB bets

  • EUR/JPY is facing hurdles around 143.80 as the ECB is expected to shift to a lower rate hike structure.
  • A decline in Eurozone HICP and an increment in German jobless numbers have weakened hawkish ECB bets.
  • This week, the speech from Haruhiko Kuroda will be keenly watched.

The EUR/JPY pair is struggling to cross the immediate hurdle of 143.80 in the early Asian session. The cross is displaying a sideways auction profile in a 143.50-143.80 range after a perpendicular decline on Wednesday. A sheer fall in the cross was backed by a decline in the headline Eurozone Harmonized Index of Consumer Prices (HICP) and an increment in the German Unemployment Rate.

The headline Eurozone HICP landed at 10.0% lower than the expectations of 10.4% and the prior release of 10.6%. Thanks to a decline in energy prices that have resulted in a slowdown in inflationary pressures as food prices are still solid in the Eurozone economy. The core HICP numbers remained flat at 5.0% due to supply chain bottlenecks.

Meanwhile, the German Unemployment Rate escalated to 5.6% against expectations and the former release of 5.5%. Also, the Unemployment Change soared to 17K vs. the former release of 8K. Accelerating interest rates by the European Central Bank (ECB) has forced firms to use their current manpower optimally due to bleak economic projections.

A slowdown in employment generation and inflation has cemented the case of 50 basis points (bps) rate hike by the ECB in its December monetary policy meeting, as suggested by Commerzbank.

On the Tokyo front, investors are keeping an eye on a speech from Bank of Japan (BOJ) Haruhiko Kuroda. The BOJ Governor is expected to dictate cues about the likely monetary policy action and growth projections. Recently, a Reuters poll dictated that more than 90% of economists have supported the view of phasing out monetary easing in the latter half of CY2023. Any discussion related to the matter could strengthen Japanese yen bulls.

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