- EUR/JPY flat lines near 183.80 in Tuesday’s early European session.
- BoJ’s Summary of Opinions showed board members saw the need for rate hikes.
- Expectations that the current cycle of ECB interest rate cuts is coming to an end might help limit the EUR’s losses.
The EUR/JPY cross trades on a flat note around 183.80 during the early European trading hours on Tuesday. Expectation of additional rate hikes by the Bank of Japan (BoJ) in 2026 could provide some support to the Japanese Yen (JPY) against the Euro (EUR). Financial markets are expected to trade on thin volumes as traders prepare for the New Year holiday.
The Japanese central bank raised its policy rate to 0.75% from 0.50%, the highest level in 30 years, at its December policy meeting. A summary of opinions released earlier on Monday showed that some board members see the need for further rate increases in the near future. Members also stated that the weaker JPY and rising long-term interest rates were due in part to the BoJ’s policy rate being too low relative to inflation.
Finance Minister Satsuki Katayama said last week that Japan has a free hand in dealing with excessive moves in the Japanese Yen. Verbal intervention from Japanese officials might also underpin the JPY and create a headwind for the cross in the near term.
The potential downside for the Euro might be limited amid signals that the European Central Bank (ECB) rate cut cycle is ending. The ECB left interest rates unchanged earlier this month and hinted they would likely remain so for some time.
ECB President Christine Lagarde noted that the central bank cannot provide forward guidance on future rate moves due to high uncertainty, emphasizing a data-dependent, meeting-by-meeting approach. The money markets have priced in for a 25 bps interest rate cut by the ECB in February 2026, currently remaining below 10%.
