The EUR/JPY pair managed to snap a four-day losing streak on Thursday, posting modest gains near 172.50 during the Asian session.
Japan’s Political Turmoil Weighs on the Yen
The Japanese Yen (JPY) remains under pressure as political uncertainty clouds the outlook for Tokyo. Prime Minister Shigeru Ishiba’s resignation has added volatility to the markets, with investors speculating that the Bank of Japan (BoJ) may delay its next interest rate hike until a new leader is in place. Concerns that future policies may prioritize stability over tighter financial conditions continue to weigh on the Yen, creating upside support for EUR/JPY.
ECB in Focus: No Change Expected, All Eyes on Lagarde
On the European side, the European Central Bank (ECB) is widely expected to leave rates unchanged at its September meeting. Inflation in the Eurozone remains close to target, allowing policymakers to maintain a wait-and-see approach for now. Market analysts, however, expect a possible rate cut in December.
ECB President Christine Lagarde’s press conference following the decision will be closely watched. While she signaled a hawkish stance in July, traders anticipate she will keep the door open for future easing—especially as inflation is forecast to dip below the ECB’s 2% target in 2026. Any dovish surprises could pressure the euro and cap EUR/JPY gains.
Outlook for Traders
- Upside Support: Political jitters in Japan keep the Yen soft, supporting EUR/JPY above 172.00.
- ECB Risk: A neutral or dovish tone from Lagarde could limit near-term euro strength.
- Key Level to Watch: The 172.50 zone acts as immediate resistance, while a break below 171.80 could shift momentum back toward the downside.
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