EURJPY quotes below 146.50 as hawkish ECB wagers surge

After falling gradually to about 146.40 throughout the Tokyo session, the EURJPY pair has seen renewed buying. After surpassing the immediate barrier of 146.70, the cross may shift the trend towards a positive trajectory. The positive risk impulse is gaining momentum as S&P500 futures have notably rallied. In addition, the long-term US Treasury yields are under downward pressure due to increased expectations of a smaller rate hike by the Federal Reserve (Fed) than in the past.

The Shared Currency bulls are gaining ground as wagers on a hawkish monetary policy by the European Central Bank (ECB) have intensified. As the Harmonized Index of Consumer Prices (HICP) hovers around double digits, ECB President Christine Lagarde may decide for a continuation of rate hikes.

A study performed by the ECB to evaluate consumer inflation expectations, assuming respondents continue to see inflation at 3% in three years and 5.1% in the coming year.

Bloomberg stated that ECB Governing Council member Martins Kazaks prefers not to dictate an interest rate ceiling during an interview in Riga. He stated that borrowing costs "remain well below where they should be" and must rise to levels that correspond to monetary tightening, not just a reduction in stimulus.

In the meantime, the Governor of the Bank of Japan (BOJ), Haruhiko Kuroda, has stated that it is premature to discuss the end of ultra-dovish interest rate policy. This week, the administration has launched two separate stimulus packages in an effort to increase aggregate demand. Therefore, the likelihood of an end to an ultra-dovish monetary policy appears modest.