Investors weigh BoJ rate hike expectations against ECB tightening prospects, keeping the pair rangebound ahead of Japan CPI data.
EUR/JPY hovers around 184.70, down 0.03% as markets balance diverging monetary policy outlooks. The Japanese Yen gains on rising bets for a Bank of Japan rate hike, potentially as early as September, with overnight index swaps pricing an 80% probability.
The Euro remains supported by expectations of further ECB tightening following recent Eurozone inflation data. However, concerns over Japan’s fiscal health, including a proposed consumption tax cut without identified revenue offsets, cap the Yen’s upside.
Markets await Friday’s Japan National CPI release, where persistent inflation above the BoJ’s 2% target could reinforce tightening expectations and bolster the Yen.