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EUR/JPY Oscillates Little as the BoJ Rise Is Now Priced in and Eurozone Data Is Positive
EUR/JPY opens the week trading unchanged, with the widely anticipated BoJ price increase already factored in. January trade surplus data and final inflation estimates for the Eurozone correspond in an instant. Apprehensions that a BoJ interest rate hike could be "one and done" have a depreciating effect on the Japanese yen.
The EUR/JPY pair is trading virtually unchanged in the mid-162.00s on Monday, after a brief increase triggered by the publication of comparatively optimistic Eurozone data. Those figures revealed a trade surplus for the region in January, and the final revisions of February inflation data corroborate initial estimates.
In the meantime, the Japanese Yen (JPY) trades in a subdued manner prior to Tuesday's policy meeting of the Bank of Japan (BoJ). Despite expectations that the Bank of Japan (BoJ) will increase interest rates from negative territory (-0.1%) during the meeting, a development that would benefit Japanese yen (JPY) due to the increased inflow of foreign capital prompted by higher interest rates, the markets seem to have already assimilated the news prior to the meeting.
The lack of additional JPY purchases preceding the meeting may have been attributed to the belief that the rate increase would be "one and done" rather than the beginning of a cycle. Bloomberg News reports that although a recent round of wage negotiations resulted in higher wages for workers, price increases have been hard-won and there is still some skepticism regarding the longer-term inflation outlook in Japan, where deflation remains a difficult conundrum to crack.
Additionally, it's possible that persistently high inflation in the euro area is influencing interest rate expectations, thereby sustaining the EUR. In contrast to initial projections, the European Central Bank (ECB) might be compelled to maintain elevated interest rates for an extended duration; this is providing support for the Euro and EUR/JPY.
According to Eurostat data, the final revisions for the Harmonized Index of Consumer Prices for the Eurozone on Monday were consistent with initial estimates of headline inflation at 2.6% YoY and 0.6% MoM, and core inflation at 3.1% YoY and 0.7% MoM. Nonetheless, these figures surpass the corresponding metrics for Japan.
The Eurozone Trade Balance data, when not seasonally adjusted, indicated a deficit of 16.8B in December and a surplus of 11.4B in January. However, when seasonally adjusted, the figures were significantly more favourable, indicating a surplus of 28.1B in January as opposed to a deficit of 14.3B in December.
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