Traders trim EUR/JPY positions near 185.75 as ECB rate hike bets and JPY intervention risks weigh on sentiment.
The EUR/JPY cross retreated from a one-month high to the 185.75-185.70 range early Wednesday, pressured by expectations of Japanese Yen intervention and Bank of Japan policy shifts. Despite the pullback, a supportive fundamental backdrop keeps bullish sentiment intact ahead of Thursday’s ECB meeting.
Markets are pricing a 78% chance of a 25-basis-point ECB rate hike in September, which would lift the deposit facility rate to 2.25%. This contrasts sharply with the Bank of Japan’s policy rate of 1%, the highest since 1995. Analysts caution that further hawkish repricing may be limited, as much of the ECB’s tightening narrative is already reflected in current expectations.
The Japanese Yen’s recent weakness remains a key risk, with traders monitoring potential intervention. Meanwhile, the ECB’s tone at its upcoming meeting could provide further support for the EUR/JPY cross.