Anna 
The EUR/JPY cross has experienced a decline below the mid-163.00s in early European trading on Tuesday. The Tokyo Consumer Price Index (CPI) for February showed a notable rise, sparking speculation that the Bank of Japan (BoJ) might exit the negative interest rate regime in the coming month. This has led to a strengthening of the Japanese Yen (JPY) and exerted downward pressure on the EUR/JPY cross. As of now, the pair is trading near 163.22, marking a 0.10% decline on the day.
Data released by the Statistics Bureau of Japan unveiled that the Tokyo CPI increased by 2.6% year-on-year in February, up from 1.6% in January. Meanwhile, the CPI excluding Fresh Food and Energy eased to 3.1% year-on-year in January from the previous reading of 3.3%. The surge in price growth above the central bank’s target for February has fueled speculation about the BoJ’s potential interest rate hike, the first since 2007, prompting a boost in the JPY against its counterparts.
BoJ board member Hajime Takata hinted at a potential early move by the central bank to abandon its negative interest rate, citing that the price aim was within reach and it would be appropriate to change the monetary policy stance. However, BoJ Governor Kazuo Ueda expressed a cautious view, stating that he would assess more data to confirm the emergence of a virtuous wage-price cycle.
On the Euro front, the European Central Bank (ECB) is anticipated to maintain the main refinancing rate steady at 4.5% during its March meeting on Thursday. ECB President Christine Lagarde, in a statement last week, mentioned that while disinflation would persist, the central bank requires more evidence before considering a reduction in the interest rate. Investor focus will intensify on the press conference, and a less hawkish tone could prompt selling pressure on the Euro (EUR), acting as a headwind for the EUR/JPY cross.
Scheduled for later on Tuesday are HCOB PMI data releases from Spain, Italy, France, Germany, and the Eurozone. Eurozone Retail Sales data is expected on Wednesday, while the ECB rate decision on Thursday will be closely monitored. These events could provide clearer directionality for the EUR/JPY cross.
