EUR/JPY extends its downside below 154.50 ahead of ECB rate decision

• EUR/JPY drops to the lowest level since October, near 154.35.
• The European Central Bank (ECB) is expected to hold the rate steady at 4.0% on Thursday.
• The Bank of Japan’s (BoJ) quarterly Tankan survey revealed that business confidence in Japan’s large manufacturers improved for the third straight quarter.
• Market players will closely watch the ECB interest rate decision on Thursday.

The EUR/JPY cross loses traction for the second consecutive day during the early European session on Thursday. Investors await the European Central Bank (ECB) monetary policy decision on Thursday, which is likely to hold the rate steady. The cross currently trades around 154.35, losing 0.77% on the day.

The ECB is anticipated to maintain its Deposit Facility rate unchanged at 4.0% at its December meeting on Thursday. Traders will monitor the key policy adjustments at the end of the meeting and the development of ending reinvestments in its PEPP program. Additionally, money markets are pricing in nearly 150 basis points (bps) of rate cuts next year.

On Wednesday, the Bank of Japan’s (BoJ) quarterly Tankan survey revealed that business confidence at large manufacturers in Japan improved for the third straight quarter. The report might convince the Bank of Japan (BoJ) to exit its negative rate policy sooner than expected, which lifts the Japanese Yen (JPY) against the Euro (EUR).

The headline Japanese Large Manufacturers’ Sentiment Index came in better than market expectations, climbing to 12.0 from the previous reading of 9.0.

On Friday, the preliminary Japanese Jibun Bank PMI report will be released. The German and Eurozone HCOB PMI reports will be in the spotlight and could trigger volatility in the market. Traders will take cues from these figures and find a trading opportunity around the EUR/JPY cross.