EUR/JPY breaks above 149.50 as ECB to raise rates despite Eurozone Inflation softens

The EUR/JPY pair has climbed above the immediate resistance of 149.50 in the Asian session. The cross remained sideways but is looking to extend its u  |  02/06/2023 02:11

• EUR/JPY has moved above 149.50 after a sideways performance fueled by hawkish ECB bets.
• ECB Lagarde is expected to raise interest rates despite significant deceleration in Eurozone inflation.
• The BoJ is expected to tweak its YCC for keeping inflation steadily above 2%.

The EUR/JPY pair has climbed above the immediate resistance of 149.50 in the Asian session. The cross remained sideways but is looking to extend its upside as hawkish European Central Bank (ECB) bets are still solid despite softening of Eurozone inflation in May.

After a sheer deceleration in Germany, France, and Spain's inflation, Eurozone inflation carry-forwarded the trail and reported lower-than-anticipated Harmonized Index of Consumer Prices (HICP) figures as individuals are surrendering luxuries due to higher cost of living. Monthly headline HICP remained flat vs. former expansion of 0.6% while annual HICP decelerated heavily to 6.1% from the estimates of 6.3% and the former release of 7.0%.

In addition to that, monthly core inflation expanded by 0.2% at an extremely slower pace against estimates of 0.8%. Annual core HICP softened to 5.3% from the estimates of 5.5%. ECB policymakers are still worried about persistence in core inflation.

A sheer slowdown in Eurozone inflationary pressures and a recession situation in Germany divided investors that the ECB could consider a pause in its June monetary policy meeting. However, ECB President Christine Lagarde said in an appearance on Thursday, “We need to continue our hiking cycle until we are sufficiently confident that inflation is on track to return to our target in a timely manner.”

On the Japanese Yen front, a volatile action is expected as the Bank of Japan (BoJ) is expected to tweak its Yield Curve Control (YCC) for keeping inflation steadily above 2%. Also, BoJ Governor Kazu Ueda cited that bond-buying operations will continue ahead.