EUR/JPY edges lower to near 167.00 following BoJ Governor Ueda’s speech

• EUR/JPY loses ground after the post-meeting speech by BoJ Governor Ueda.
• BoJ Governor Ueda showed JGB purchasing plans through March 2027, aiming to enhance flexibility and predictability.
• The odds of an ECB rate cut in September have slipped to 50%, down from 60%.

EUR/JPY halts its winning streak that began on June 5, trading around 167.20 during the early European hours on Tuesday. Earlier in the Asian session, the pair reached 167.59, the highest level since July 2024. The currency pair holds ground as the Bank of Japan (BoJ) announced to keep the short-term interest rate target steady in the range of 0.4%- 0.5% at its policy meeting in June.

Bank of Japan (BoJ) Governor Kazuo Ueda outlined JGB buying plans through March 2027, while speaking at a press conference, to allow flexibility, predictability. Kazuo said that the BoJ will respond swiftly in case of a rapid rise in long-term interest rates by increasing bond buying, conducting fixed-rate bond purchase operations, and using fund-supply operations against pooled collateral.

Governor Ueda cautioned about the risks of quick tapering of bonds, which could lead to unintended market consequences. He noted that the bond tapering decision would be based on market participants' opinions. Ueda mentioned the importance of maintaining accommodative monetary conditions to support the economy, while acknowledging that rising prices have an impact on inflation expectations.

The Euro (EUR) receives support from improved risk sentiment as concerns over escalating tensions in the Middle East ease. Reuters reported that Iran reportedly asked many countries, including Saudi Arabia, to urge US President Donald Trump to use his influence on Israel for an immediate ceasefire.

G7 leaders reaffirmed in a joint statement, “We have been consistently clear that Iran can never have a nuclear weapon.” They highlighted that resolving the crisis can lead to broader de-escalation of hostilities in the region.

The EUR/JPY cross receives support as the Euro gains ground as markets undermine easing monetary policy by the European Central Bank (ECB). The probability of a September rate cut by the ECB slipped to 50%, down from 60%, with markets projecting the deposit rate at 1.79% by the end of 2025. ECB policymaker Joachim Nagel supported maintaining policy flexibility in light of the complex global environment.