EUR/JPY Slides on French Election Anxiety and BoJ QE Exit Signals

: George Solotarov; 14 June 2024; Hits: 91

EUR/JPY Slides on French Election Anxiety and BoJ QE Exit Signals

The EUR/JPY exchange rate dipped over 0.3% on Friday, hovering around 167.00. This decline is attributed to the Euro's (EUR) weakness due to mounting concerns surrounding the outcome of France's upcoming legislative elections, coupled with the Japanese Yen's (JPY) strength as the Bank of Japan (BoJ) signals a potential wind-down of its quantitative easing (QE) program.

French Election Jitters Weigh on Euro

The uncertain outcome of the French legislative elections, scheduled for late June and early July, is casting a shadow over the Euro. President Macron's centrist party faces a formidable challenge from the far-right National Rally (RN), raising concerns about potential political instability and its broader impact on the European Union.

BoJ Signals End of QE Era

Meanwhile, the Yen gained traction following the BoJ meeting on Friday. While the central bank maintained its ultra-low interest rate policy, Governor Kazuo Ueda announced plans to gradually reduce Japanese Government Bond (JGB) purchases over the next one to two years. This move marks a significant shift in the BoJ's stance, potentially ending its long-standing QE program, which has had a negative impact on the Yen's value.

ECB Hints at More Dovish Stance

While recent comments from ECB officials initially suggested a cautious approach to further rate cuts, Thursday and Friday saw a shift towards a more dovish tone. Some policymakers indicated that additional easing measures might be necessary if the disinflationary process continues, while acknowledging potential risks from persistent wage pressures.