EUR/JPY holds above 156.00 as ECB refrains from committing to specific rate cut path

• EUR/JPY maintains recovery move from near six-week low of 155.15.
• The BoJ is expected to leave interest rates unchanged at 0.25% on Friday, but will offer firm guidance.
• ECB officials are refraining from committing to a pre-defined path of interest rate cuts.

EUR/JPY maintains a slight recovery move above 156.00 in the European session on Tuesday, from a fresh near six-week low of 155.15 hit on Monday. The cross is maintaining recovery for now, but the outlook remains uncertain amid growing speculation that the Bank of Japan (BoJ) will raise interest rates further this year.

The BoJ has already raised interest rates to 0.25% in its last three meetings. Analysts at Standard Chartered see BoJ interest rates rising to 0.5% by the end of the year. Market experts’ confidence has been boosted by inflation that has remained above 2% for the past 21 months.

At its monetary policy meeting on Friday, the BoJ is expected to leave key lending rates unchanged at their current levels.

Meanwhile, the euro (EUR) is gaining as market speculation on the European Central Bank (ECB) offering a back-to-back interest rate cut at its October meeting eased. Comments on Monday by ECB Governing Council member Peter Kazimir indicated that the central bank will wait for more good data to meet its forecasts before easing monetary policy further.

“The ECB needed to make sure incoming data confirmed its forecasts, otherwise policymakers could regret rushing to cut borrowing costs before inflation was sustainably subdued,” Kazimir said, Reuters reported.

On the economic front, the ZEW Eurozone Economic Sentiment Survey – which measures institutional investor sentiment – ​​fell to 9.3 in September, the lowest since November 2023. Sentiment data was expected to fall slightly to 17.6 from 17.9 in August.