The EUR/JPY currency pair has edged lower, hovering near 163.00 during European trading hours. This dip follows an interview with European Central Bank (ECB) President Christine Lagarde, published in the Financial Times on Monday.
In the interview, Lagarde highlighted that the ECB is approaching its objective of steadily reducing inflation to the 2% medium-term target. She also underlined the need for ongoing vigilance, especially when it comes to inflation within the services sector. Earlier in December, Lagarde had signaled that further interest rate cuts would be on the table if inflation continued to trend towards 2%. ECB Governing Council member Boris Vujcic further corroborated this dovish stance on Saturday, stating that the central bank aims to keep cutting borrowing costs in 2025.
Meanwhile, in Japan, Friday’s robust National Consumer Price Index (CPI) data has upped the ante for a possible interest rate hike by the Bank of Japan (BoJ) in January or March. Year-over-year inflation hit a three-month high of 2.9% in November, with the annual core inflation rate rising to 2.7%, both figures exceeding market forecasts.
However, traders are treading carefully. The BoJ has held its policy rate steady for three consecutive meetings, keeping the short-term rate target within 0.15% – 0.25%, in line with market expectations. With the release of the BoJ’s Meeting Minutes slated for Tuesday, market participants are waiting with bated breath to glean more insights into the central bank’s intentions regarding future rate hikes.
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