The EUR/JPY pair is continuously striving to challenge the significant hurdle of 158.00 during the European session. Despite investor optimism surrounding the European Central Bank’s (ECB) potential interest rate hikes to control persistent inflation, the asset has encountered selling pressure around 157.80 on several occasions.

In the Eurozone, inflation has become a pressing issue, with both the headline and core Consumer Price Index (CPI) showing significant disparities. Preliminary data for June reveals that the decrease in gasoline prices is putting substantial downward pressure on the cost of services.

Headline inflation has moderated to 5.5% in June, down from the previous release of 6.1%. This marks the seventh decline in price pressures in the last eight months.

Simultaneously, core inflation, which excludes volatile oil and food prices, has slightly eased to 6.8% from the previous reading of 6.9%. ECB policymakers consider core inflation as the preferred indicator when formulating monetary policy strategies.

During the ECB forum of Central Banking, ECB President Christine Lagarde stated that the current interest rate policy lacks the necessary stringency to achieve the 2% inflation target. Expectations for interest rate cuts seem unfounded in light of the persistently high inflation levels.

Regarding the Japanese Yen, Bank of Japan (BOJ) Deputy Governor Ryozo Himino acknowledged that recent price increases surpassed earlier projections, and inflation expectations were on the rise. This suggests that the economy is moving closer to the BOJ’s 2% inflation target, as reported by Reuters.

Himino further mentioned that signs of cost-push inflation were diminishing, while demand-driven inflation was gaining ground. This could be attributed to the expansionary interest rate policy and rising wages.


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