The Euro has weakened against the Japanese Yen as markets are nearly certain that the Bank of Japan will increase interest rates at its policy meeting. The current probability of a 25 basis point rate hike by the BoJ is at 94%, with the EUR\/JPY trading around 182.27.<\/p>\n
Recent data supports this expected rate hike, with the BoJ Tankan Large Manufacturing Index rising to 15 in Q4, its highest since 2021. Despite some concerns over US tariffs and rising costs, BoJ officials acknowledge several positive factors, including improved cost pass-through and strong demand related to artificial intelligence chip production.<\/p>\n
Meanwhile, Eurozone Industrial Production increased by 0.8% in October, surpassing the anticipated 0.1% rise. As a result, the Euro received limited support despite outperforming expectations. Attention will shift to upcoming Eurozone data and the European Central Bank’s decision, where all key interest rates are expected to remain unchanged.<\/p>\n
Japanese Yen has shown a strong performance against other currencies. It strengthened to varying degrees against the GBP, CAD, and AUD, among others, as summarised in a heat map of percentage changes among major currencies.<\/p>\n
The Japanese Yen is strengthening significantly as we approach the Bank of Japan’s meeting this Friday. With markets pricing in a near-certain 25 basis point rate hike, the EUR\/JPY cross has already fallen towards the 182.00 level. This move reflects the high conviction that the BoJ will finally tighten policy further.<\/p>\n
For derivative traders, buying EUR\/JPY put options is a straightforward way to position for further Yen strength heading into Friday’s decision. However, we must be cautious of a “sell the fact” reaction, where the Yen could weaken after the announcement since the hike is already 94% priced in. We saw this exact pattern back in March 2024 when the BoJ ended its negative interest rate policy; the Yen weakened in the following weeks because the move was fully anticipated.<\/p>\n
The real opportunity might be in positioning for a surprise, given how one-sided the market is. A low-cost, out-of-the-money EUR\/JPY call option could provide significant returns if the BoJ unexpectedly holds rates steady. Such a surprise would cause a sharp reversal, catching the majority of traders off guard and sending the currency pair soaring.<\/p>\n
On the other side of the trade, the Euro’s direction will be influenced by Tuesday’s PMI data and the European Central Bank’s decision on Thursday. While the ECB is expected to hold rates, recent data shows Eurozone inflation remains persistent, with the Harmonised Index of Consumer Prices (HICP) for November 2025 coming in at 2.6%, still above the 2% target. Any unexpectedly hawkish tone from the ECB could provide a floor for EUR\/JPY, complicating purely short positions.<\/p>\n
Looking beyond this week, the key will be the BoJ’s forward guidance on future rate hikes. Even if a hike is delivered, if officials signal a cautious pace due to concerns over labor costs and consumption, the Yen’s rally could be short-lived. Derivative strategies like calendar spreads on JPY futures could be used to trade the difference between short-term volatility and longer-term policy expectations.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Euro weakens as BoJ likely to raise rates; Yen strengthens broadly amid strong data and market expectations.<\/p>\n","protected":false},"author":62,"featured_media":17042,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36872","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=36872"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36872\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17042"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=36872"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=36872"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=36872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}