EUR/JPY refreshes 14-week high near 164.50 despite ECB dovish bets mount

EUR/JPY rallies to near 164.50 even though a few ECB officials see key borrowing rates declining below the neutral rate.
ECB officials worry about growing Eurozone economic risks.
Investors will focus on BoJ Ueda’s speech for fresh interest rate guidance.

The EUR/JPY pair posts a fresh 14-week high near 164.50 in Wednesday’s European session. The cross soars even though a few European Central Bank (ECB) officials see the Deposit Facility Rate falling below neutral levels, which is currently at 3.25% after three interest rate cuts this year.

ECB officials see more interest rate cuts as appropriate as they worry that inflationary pressures in the Eurozone could remain below 2% due to poor economic growth. Eurozone’s largest nation, Germany, is expected to end the current year with a decline in the output by 0.2%, predicted by the German economic ministry. This would be the second straight year of contraction in a row.

According to economists, the ECB neutral rate is around 2% or 2.25%, Reuters reported. ECB funds rate heading below the neutral rate suggests the central bank to continue easing in 2025. Meanwhile, traders have already priced in one more interest rate cut in the December meeting. This has weakened the Euro (EUR) against its major peers.

Euro PRICE Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.16%	0.05%	1.10%	0.06%	0.39%	0.31%	0.18%
EUR	-0.16%		-0.10%	0.96%	-0.08%	0.25%	0.16%	0.03%
GBP	-0.05%	0.10%		1.07%	-0.00%	0.35%	0.26%	0.18%
JPY	-1.10%	-0.96%	-1.07%		-1.03%	-0.71%	-0.78%	-0.87%
CAD	-0.06%	0.08%	0.00%	1.03%		0.33%	0.27%	0.17%
AUD	-0.39%	-0.25%	-0.35%	0.71%	-0.33%		-0.06%	-0.16%
NZD	-0.31%	-0.16%	-0.26%	0.78%	-0.27%	0.06%		-0.10%
CHF	-0.18%	-0.03%	-0.18%	0.87%	-0.17%	0.16%	0.10%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

However, market participants have underpinned the Euro against the Japanese Yen (JPY) amid growing uncertainty over whether the Bank of Japan (BoJ) will hike interest rates further this year. In the last policy meeting, BoJ members didn’t offer any cues about potential rate hikes in the remainder of the year. The next BoJ policy meeting is scheduled for October 31 in which market participants expect the central bank to leave interest rates unchanged, with US election risks looming large.

In today’s session, investors will pay close attention to BoJ Governor Kazuo Ueda’s speech at the International Monetary Fund (IMF)-hosted “Governors Talk” for fresh guidance on interest rates.

Economic Indicator

BoJ Governor Ueda speech

Kazuo Ueda is the Governor of the Bank of Japan, he replaced Haruhiko Kuroda on April 2023. Before being appointed, Ueda was an economics professor at the University of Tokyo and held a PhD from the Massachusetts Institute of Technology. Mr. Ueda is the first academic economist to run the bank in post-war Japan, breaking with the tradition that the governor is drawn from the BoJ or finance ministry.