ECB Holds Rates Steady, EUR/JPY Reacts: What's Next?
The EUR/JPY pair is hovering around 171.00 after the European Central Bank (ECB) decided to maintain its interest rates, including the deposit rate at 3.75%. The ECB's decision aligns with market expectations, but the lack of a clear interest rate path has left traders anticipating ECB President Christine Lagarde's press conference for further insights.
The ECB acknowledged a slight uptick in core inflation due to temporary factors but indicated that most measures remained stable or declined in June. The central bank emphasized its commitment to maintaining restrictive financing conditions to ensure inflation returns to its 2% target.
Additionally, the ECB revealed plans to scale back its asset purchase programs, including the Asset Purchase Program (APP) and the Pandemic Emergency Purchase Program (PEPP). This move will result in a monthly reduction of €7.5 billion on average.
From a technical perspective, the EUR/JPY pair has shown some recovery after briefly dipping to a daily low of 170.01. However, momentum still favors sellers following the Japanese authority's intervention in the forex market. The pair's ability to hold above 171.00 could potentially pave the way for a move towards July's high of 172.83. Conversely, a drop below 171.00 might expose the pair to further downside pressure.