Amid fears of intervention and a dovish ECB, EUR/JPY drops to around 162.00

The EUR/JPY pair faces selling pressure around 162.15 during the early European session on Monday, as a dovish sentiment from European Central Bank (ECB) officials weighs on the Euro (EUR) against the Japanese Yen (JPY). Traders are now turning their attention to ECB President Christine Lagarde’s speech on Tuesday for potential new market signals.

Growing speculation that the ECB might accelerate its monetary policy easing could further pressure the Euro. At its October meeting, the ECB reduced the deposit rate by another 25 basis points (bps). During the press conference, President Lagarde remarked that there is "probably" more downside risk than upside in the ECB’s inflation outlook.

Lagarde also emphasized that the central bank would not commit to any predetermined path for rates and would consider all available data between now and December before making further decisions. Additionally, ECB policymaker Francois Villeroy de Galhau noted over the weekend that inflation in the Euro area is likely to reach the ECB’s 2% target by early 2025, according to Bloomberg.

Meanwhile, verbal intervention from Japanese officials continues to support the Yen. On Friday, Japan’s top currency diplomat, Atsushi Mimura, expressed that authorities are monitoring currency movements with a heightened sense of urgency.

However, uncertainty surrounding the timing and pace of future interest rate hikes by the Bank of Japan (BoJ) may limit the JPY’s strength and provide some support to EUR/JPY. BoJ policymaker Seiji Adachi recently indicated that the bank should proceed with rate increases at a “very moderate” pace to avoid premature hikes.

Paraphrasing text from "FX Street" all rights reserved by the original author.