ECB Rate Cut - EUR/JPY Trading ImpactThe European Central Bank (ECB) is expected to cut rates by 25 bps today, lowering the deposit rate to 2.00%. While this move is largely priced in, what matters for markets—especially EUR/JPY—is the forward guidance.
Relevance to EUR/JPY:
Rate Cut = EUR Bearish: Lower rates reduce euro appeal, especially vs. the yen, which is still heavily influenced by the Bank of Japan’s ultra-loose policy. A clear ECB dovish tone may weigh on EUR/JPY.
ECB Caution May Limit EUR Downside: If the ECB signals it's nearing the end of cuts or expresses concern over sticky inflation, it could support EUR. This would limit downside in EUR/JPY or even trigger a rebound.
BOJ Policy Still Ultra-Loose: Japan’s rates remain near zero, and unless the BOJ surprises with a hawkish shift (unlikely short term), EUR/JPY is more likely to react to ECB tone than BOJ policy.
Risk Sentiment Matters: EUR/JPY often tracks risk appetite. If markets interpret the ECB cut as growth-supportive, and global equities rise, EUR/JPY could hold firm or climb despite the rate cut.
Trading Implications
Dovish ECB = EUR/JPY downside, especially if markets price in more cuts.
"One-and-done" message = EUR/JPY support or slight upside.
Watch for BOJ comments or risk sentiment shifts to fine-tune positioning.
