EUR/JPY is testing 183.15 high ahead of central banks’ decisions

Finance

EUR/JPY is testing 183.15 high ahead of central banks decisions

The Yen remains on its back foot on Thursday, despite market expectations that the BoJ will hike interest rates on Friday. The EUR/JPY has extended its recovery from Wednesdays lows at 181.60 and is pushing against a 35-year high, at 183.15 at the time of writing.

The Focus on Thursday is on the European Central Bank‘s monetary policy meeting. The Bank is all but certain to keep its benchmark interest rate unchanged for the fourth consecutive time, and investors will be attentive to the bank’s economic projections, amid rising speculation about the possibility of a rate hike in 2026.

Eurozone data release this week failed to provide any significant support to the Euro, however. The German IFO Business Climate Index deteriorated further, underscoring the weak economic momentum of the region‘s major economy, and November’s inflation figures were revised lower, easing pressure on the ECB to hike interest rates any time soon.

In Japan, the BoJ is widely expected to hike rates by 25 basis points to 0.75% on Friday, but the path forward is unclear. Japans Prime Minister Takaichi defends low borrowing costs and is likely to oppose a steep tightening cycle.

Apart from that, investors remain wary that Takaichis big-spending polices might add further pressure on the already strained government debt and trigger a credit crisis. This has been keping the Yen vulnerable against its main peers over the last few weeks.