The EUR to JPY market bias is currently bearish.
Key drivers include:
- The interest rate differential is shifting, with the Bank of Japan recently raising rates to combat higher inflation, while the European Central Bank remains cautious about the euro's strength.
- Japan's improved defense budget and increased military spending highlight a focus on national security, contributing to optimism about the yen.
- Current economic metrics suggest Eurozone growth is stable, but geopolitical uncertainties and past inflation pressures cloud the euro's outlook.
The expected trading range for EUR/JPY suggests it may move within a wide band over the next few months. Upside risks could arise from unexpected economic growth data in Europe, while downside risks include further monetary policy shifts from the ECB or worsening geopolitical tensions impacting market sentiment.
Recent oil price fluctuations, currently below average, could also indirectly influence both currencies, particularly if they affect inflation outlooks in either region.
