Ella 
EUR/JPY gained some positive traction on Thursday and recovered further from a more than one-month low near 155.45 hit the previous day. However, spot prices fell a few points from the day’s highs and are currently trading near the 157.00 mark as investors look to the European Central Bank (ECB) interest rate decision to bring new impetus.
The European Central Bank is widely expected to announce a 25 basis point (bps) interest rate cut at the end of its September policy meeting, the second adjustment in the current easing policy cycle. However, market focus will remain on the latest economic forecasts and forward guidance. In addition, ECB President Christine Lagarde’s remarks at the post-meeting press conference will also affect the trend of EUR/JPY and determine the recent trajectory of EUR/JPY.
A weak reading from Japan’s producer price index (PPI) dampened hawkish signals from the Bank of Japan (BoJ) and triggered some yen selling. Indeed, the headline producer price index fell 0.2% in August, bringing annual growth to 2.5% from 3.0% in July, a larger-than-expected decline. This, coupled with a generally bullish outlook for equity markets, has weakened safe-haven demand for the yen, providing support for EUR/JPY.
Still, Bank of Japan (BoJ) board member Naoki Tamura said the road to ending easing remains long, reaffirming bets the BOJ will further raise borrowing costs by the end of the year. This is a sharp departure from the dovish stance taken by the European Central Bank and should limit the yen’s losses. Therefore, it would be prudent to wait for strong follow-through buying before confirming that the EUR/JPY cross has bottomed.
