Anna 
During the early European session on Monday, the EUR/JPY cross is trading below the 163.00 level. The Japanese Yen (JPY) is under pressure due to concerns about a potential technical recession in Japan and prevailing risk-on sentiment. However, warnings from Japanese authorities about potential FX market intervention may limit the downside for the JPY.
The current exchange rate hovers near 162.85, showing a marginal 0.01% decline for the day. European Central Bank (ECB) Governing Council member Yannis Stournaras mentioned on Friday that the ECB won’t have sufficient data to decide on interest-rate cuts until June, despite inflation potentially reaching the 2% target this year. On the contrary, ECB policymaker Mario Centeno indicated that rate cuts could be considered next month if data supports it.
This divergence in monetary policy between the ECB and the Bank of Japan (BoJ) provides some support to the Euro (EUR) but acts as a headwind for the EUR/JPY cross. Japan recently entered a technical recession, with its Gross Domestic Product (GDP) contracting unexpectedly for two consecutive quarters. The weaker GDP growth may lead the BoJ to delay an exit from negative rates, impacting the JPY’s performance against other currencies.
Despite the economic challenges, verbal intervention from Japanese authorities, such as Finance Minister Shunichi Suzuki’s comments last week, could potentially boost the JPY.
Looking ahead, the release of Japan’s Consumer Price Index (CPI) for January is scheduled for Tuesday. Later in the week, German Retail Sales and CPI data, as well as Eurozone Harmonized Index of Consumer Prices (HICP) data, will be closely watched for potential trading opportunities around the EUR/JPY cross.
