Yen falls sharply as BoJ keep rates unchanged

The EURJPY pair attracted significant bids around 169.70 and recovered to near 170.80 on Thursday, snapping a three-day losing streak as the Japanese yen weakens after the Bank of Japan left interest rates steady at 0.5%, as expected.

BoJ Governor Kazuo Ueda has left the door open for more interest rate hikes saying that the underlying inflation was “likely to stall but gradually accelerate”.

Ueda added that the Japan-US trade deal reduces “uncertainty over Japan’s economic outlook”, however, the impact of tariffs is yet to emerge. He further added that the BoJ wants to scrutinise if tariffs impact “Japan’s manufacturers and their wages”.

Meanwhile, the Euro gained on better-than-projected flash Q2 Gross Domestic Product (GDP) data released on Wednesday. In the second quarter of the year, the Eurozone economic growth came in at 0.1%, while it was expected to remain flat.

Going forward, investors will focus on the Eurozone preliminary Harmonised Index of Consumer Prices (HICP) data for July, which will be released on Friday. In Thursday’s session, investors will monitor the inflation data of July from Germany, France and Spain.

The EURJPY bounced back strongly after attracting bids below 170.00. However, its near-term trend remains uncertain. Going forward, the pair could witness more upside towards the July 2024 high of 175.43 if it breaks above the last-week high of 173.25.

On the flip side, a downside move by the pair below the intraday low of 169.70 will push it lower to near the July 1 low of 168.46, followed by the June 19 low of 166.04.