The EUR/JPY pair struggles to defend the auction above the psychological support of 150.00 in the European session. The cross is expected to remain on the tenterhooks as investors are awaiting the speech from European Central Bank (ECB) President Christine Lagarde before the European Parliament.
ECB Lagarde is expected to guide the likely monetary policy action in June’s monetary policy meeting. The street is convinced that the ECB will hike interest rates further despite the sheer softening of Eurozone inflation.
An in-depth investigation of the Eurozone’s May inflation report showed that headline price pressures slowed dramatically amid declining energy and food inflation, while core inflation is still stubborn. Sticky core inflation strengthens the case for more interest rate hikes by the ECB. Also, ECB policymaker, Boštjan Vasle, said on Friday, “More rate hikes needed to get inflation to the 2% target.” He further added, “Core inflation remains high and persistent.”
In addition to ECB Vasle, ECB Governing Council member Gabriel Makhlouf, said that they are “likely to see another rate increase at the next meeting.“ He added that a fall in Eurozone inflation is welcomed but is not definitive with underlying solid pressures. We will likely see another rate increase at the next meeting as the ECB has not reached the moment where it can say let’s now stop.
Meanwhile, the Japanese Yen is trying to get the upper hand as the Bank of Japan (BoJ) is expected to intervene to provide some cushion to the domestic currency. According to the latest Reuters report, bets against the Japanese Yen had risen to $8.6 billion equivalent, a similar level when Japan’s authorities intervened last year.
Japan’s Q1 Gross Domestic Product (GDP) will remain in the spotlight. Thursday’s GDP data is expected to expand by 0.5% vs. prior expansion of 0.4% quarterly. Annualized Q1 GDP is seen steady at 1.6%.