EUR/JPY rebounds from 137.30 on expectations of ECB-BOJ policy divergence

  • EUR/JPY is attempting to recapture the intraday high at 138.07 as the focus shifts to Germany HICP.
  • Advancing odds of an ECB-BOJ policy diversion may keep the yen bulls on the tenterhooks.
  • BOJ Kuroda is sticking to its ultra-loose monetary policy.

The EUR/JPY pair has crossed the interim hurdle of 137.60 after a confident rebound from the intraday low at 137.28. On a broader note, the cross is trading back and forth in a tad wider range of 136.86-139.14 from the past three trading sessions. The asset is expected to remain sidesways as investors are awaiting the release of the Germany Harmonized Index of Consumer Prices (HICP), which are due on Wednesday.

A preliminary estimate for the Germany HICP is 8.2%, similar to the prior release. The inflation rate is soaring in eurozone, thanks to the costly gas prices due to the prohibition of oil imports from Russia. It is worth noting that the European Central Bank (ECB) has not elevated its interest rates yet. Although the conclusion of the Asset Purchase Program (APP) has been announced, the rate hike has not featured like the other Western leaders.

This time, the odds of a rate hike announcement by the ECB are higher as any further delay in interest rate elevation may turn the runaway inflation into the galloping one.

On the Tokyo front, the Bank of Japan (BOJ) is dedicated to losing monetary policy further. The commentary from BOJ Governor Haruhiko Kuroda on maintaining the ultra-loose monetary policy has strengthened the odds of ECB-BOJ policy divergence.

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