EUR/JPY BUILDS A CUSHION BELOW 145.00 AS HIGHER EUROZONE INFLATION FUELS HAWKISH ECB BETS

EUR/JPY has sensed a pause in its gradual decline below 145.00 ahead of Tokyo's Inflation.

A surprise rise in Eurozone inflation has bolstered the case of more rates from the ECB.

ECB Lagarde reiterated that a 50 bps rate hike for March is on the table as inflation is still too high.

The EUR/JPY pair is displaying a sideways auction in a range below 145.00 in the early Tokyo session. The cross declined on Thursday after failing to sustain above Tuesday’s high at around 145.50. The downside pressure in the Euro came after the release of the Eurozone Harmonized Index of Consumer Prices (HICP) data.

The preliminary Eurozone HICP (Feb) landed at 8.5%, surpassing the consensus of 8.2% but remaining lower than the prior release of 8.6%. Earlier this week, nations like Germany, Spain, and France reported their HICP figures well above the estimates and the former releases. This indicates that the Eurozone inflation is getting stubborn after some declining moves and more rates from the European Central Bank (ECB) are highly required to cool down the stick inflation.

ECB President Christine Lagarde reiterated on Thursday “The case for a 50 bps rate hike this month is still on the table as inflation is still too high.” She further added, “We have to use all tools at our disposal to bring inflation down and we don’t know the peak for rates yet.”

Analysts at Danske Bank expect ECB’s deposit rate to peak at 4%, after a 50 basis points interest rate hike, in both March and May followed by a 25bp hike in both June and July.

On the Tokyo front, investors are awaiting the release of the Tokyo Consumer Price Index (CPI) for fresh impetus. Tokyo’s headline Consumer Price Index (CPI) (Feb) is expected to decline to 4.1% from the prior release of 4.4%. The Japanese economy is struggling to accelerate domestic demand despite immense initiatives from Bank of Japan (BoJ) policymakers and the administration and an escalation in the price pressures is coming from rising import prices.