Money markets price a 90% chance of a 25 bps ECB rate increase in September, bolstering the Euro amid energy inflation risks.
EUR/JPY holds near 183.80, unchanged on the day, as expectations of a European Central Bank rate hike in September support the Euro. A Reuters poll shows 57 of 69 economists forecast a 25 basis points increase to 2.5% next month, with 80% expecting rates to end the year at that level.
Eurozone Industrial Production remained flat in June, defying forecasts of a 0.1% contraction, while energy-driven inflation risks keep investors focused on the ECB’s policy path. Meanwhile, the Japanese Yen faces pressure from wide interest rate differentials and fiscal concerns.
Markets are pricing a 90% probability of a 25 bps ECB hike in September, limiting downside for the Euro against the Yen.