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EUR/JPY confined in narrow range ahead of ECB rate decision

The EUR/JPY pair remained stuck within a narrow range on Thursday, as market focus sets on the European Central Bank’s monetary policy decision due later in the day.

Futures market is now pricing an almost 60% chance of a 10th consecutive rate hike by the ECB in September.

A recent report by Reuters stated that Europe’s central bank expected inflation in the Euro Area to stay above 3% in 2024, or still way above the ECB’s 2% target.

In July, the ECB raised the rate on main refinancing operations by another 25 basis points to 4.25%, a level not seen since October 2008.

Additionally, the rate on the deposit facility was raised to 3.75%, an over 22-year high.

The minutes from the ECB’s July meeting showed that policy makers maintained the possibility of a rate increase in September. Yet, some monetary policy committee members suggested a rate hike might no longer be necessary once new projections are disclosed.

The minutes showed arguments favoring a rate pause were gaining traction, mostly due to the belief the impact of cumulative tightening was strong enough to drive underlying inflation down.

Meanwhile, the Japanese Yen firmed, as US 10-year Treasury yield eased from a 3-week high of 4.352%.

As of 7:38 GMT on Thursday EUR/JPY was inching down 0.03% to trade at 158.124.

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