EUR/JPY Outlook:
Slightly positive, but likely to move sideways as the rate remains just above its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The European Central Bank has kept its interest rates stable, while the Bank of Japan has recently raised its rates, creating a supportive environment for the yen against the euro.
• Risk/commodities: Oil prices are at 7-day highs, creating upward pressure on the euro due to potential inflation concerns in the Eurozone.
• One macro factor: Soft Eurozone economic indicators have led to muted trading for the euro, casting doubt on its strength in the near term.
Range:
The EUR/JPY is expected to hold within its recent range, given its stability.
What could change it:
• Upside risk: A stronger-than-expected recovery in Eurozone economic data could support the euro.
• Downside risk: A significant escalation in geopolitical tensions could weaken the euro further against the yen.