Insights 
VT 
Data Dependent Approach
European Central Bank policymaker Francois Villeroy noted a flexible approach is required considering various financial risks, relying on data and forecasts. ECB Governor Martins Kazaks advised against overreacting to inflation and growth risks in the Eurozone.
The Euro appreciated against major currencies today, particularly against the British Pound. The heat map shows percentage changes of major currencies against each other, with the base currency from the left column and the quote currency from the top row.
For example, the Euro has strengthened by 0.08% against the Japanese Yen. The information provided here is for informational purposes only and does not constitute financial advice, with risks involved in open market investments.
We see the EUR/JPY pair holding firm near 177.70, reflecting a clear policy split between central banks. The European Central Bank maintains a data-dependent stance, while the Bank of Japan remains hesitant to tighten its policy significantly. This fundamental divergence will likely continue to steer the market in the coming weeks.
Despite Japan’s core inflation consistently tracking above the 2% target for over a year, last reported at 2.7% in October 2025, the Bank of Japan has kept its policy rate near 0.1%. Speculation that the new Prime Minister will push for more fiscal stimulus further complicates any move toward significant rate hikes. This suggests continued downward pressure on the Yen, as monetary policy is unlikely to offer it support.
Strategic Opportunities in the Market
On the other side, the Eurozone’s key interest rate is holding at 3.75%, creating a very attractive interest rate differential for traders. With Eurozone inflation, which was last recorded at 2.5%, still above the target, the ECB is unlikely to consider rate cuts soon. This backdrop solidifies the Euro’s strength against the Yen and reinforces the appeal of the carry trade.
Given this environment, we should consider strategies that benefit from a further rise in EUR/JPY. Buying call options on the pair offers a way to capture potential upside while limiting risk, which is prudent given the uncertainty around the BoJ’s December meeting. Implied volatility may rise as we approach that date, making now a good time to review option pricing.
Looking back, this uptrend is not new; we have seen the pair climb from the 170 level in late 2024 and from below 150 back in 2023. This long-term momentum supports the view that any dips are likely to be seen as buying opportunities. The path of least resistance appears to remain upward for the foreseeable future.
