The EUR/JPY currency pair fell to around 161.05 on Thursday, driven by anticipation of an ECB interest rate cut and rising bets for further Bank of Japan (BoJ) rate hikes. The market expects the ECB to lower its key rate by 25 basis points to 2.75% to combat an uncertain economic outlook and persistent inflation. Meanwhile, the BoJ's potential for continued rate increases strengthens the Japanese Yen, putting downward pressure on EUR/JPY.
EUR/JPY extends downside to around 161.05 in Thursday’s early European session, down 0.43% on the day. The ECB is expected to cutrates at its January meeting on Thursday. Rising bets for more BoJ rate hikes lift the Japanese Yen and act as a headwind for EUR/JPY . The EUR/JPY cross extends the decline to near 161.05 during the early European session on Thursday.
The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year.
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