EUR/JPY holds ground around 162.50, downside risks emerge after verbal interventions

• EUR/JPY remains steady with downside risks amid verbal intervention from Japanese authorities.
• Japan’s Atsushi Mimura stated that recent Yen movements have been “somewhat rapid and one-sided.”
• The Euro faced challenges as the ECB reduced its Rate on Deposit Facility to 3.25%.

The EUR/JPY pair remains stable around 162.60 during early European trading on Friday. The Japanese Yen (JPY) finds support from verbal interventions by Japanese authorities. A government spokesman stressed the importance of stable currency movements that align with economic fundamentals, emphasizing that officials are closely monitoring exchange rate fluctuations, especially any speculative activity, with increased vigilance.

Japan’s Vice Finance Minister for International Affairs, Atsushi Mimura, also commented on Friday that the recent Yen movements have been “somewhat rapid and one-sided.” Mimura underscored that excessive volatility in the foreign exchange market is undesirable.

Meanwhile, Japan’s National Consumer Price Index (CPI) slowed to a year-on-year rate of 2.5% in September. The Core CPI, which excludes fresh food prices, dropped to 2.4%, down from a 10-month high of 2.8%.

The Euro came under downward pressure after the European Central Bank’s (ECB) policy decision on Thursday. The ECB lowered its Main Refinancing Operations Rate and the Deposit Facility Rate by 25 basis points to 3.40% and 3.25%, respectively, in line with market expectations.

These consecutive rate cuts by the ECB in 13 years, lowered the Deposit Facility Rate to 3.25%. The decision comes in response to a sharp decline in inflation, which had surged to a peak of 10.6% in October 2022 but fell to 1.7% in September, now below the ECB’s 2% target.

During the post-meeting press conference, ECB President Christine Lagarde left the markets uncertain about the timing of future rate cuts, though she reassured that the Eurozone economy is on course for a soft landing.