EUR/JPY plummets ahead of the ECB decision – by HCetinbudaklar EURJPY Currencies RiskAversion Technical Analysis ECB
The pair trades between 140.61 and 144.98 during Wednesday's sessionDaily price movements:sees a strong bearish intraday movement on Wednesday and trades slightly above the lowest intraday price of 140.61 – spectacularly below the highest intraday price of 144.98. The overall intraday price change stands at -2.34% at press time.
The unexpected event, which follows on from the demise of Silicon Valley Bank over the weekend, suggestsmay be more accommodative at its monetary policy meeting on Thursday, March 16. Previously economists had expected the central bank to raise interest rates by 50 basis points at the meeting to combat the effects of persistent inflation, however, given the risks this might cause to liquidity within the banking sector, it is more likely central bankers will opt for a smaller rate hike or none at all.
This is causing the current steep sell-off in the Euro since higher interest rates tend to support currencies and lower to weaken them. This is due to the effect of the carry trade, in which global investors borrow in a currency with a low interest rate to purchase a currency with a high interest rate.
Preciently, economists at German lender Commerzbank raised the risks of contagion to the Euro in a recent analyst’s note, "From the market's perspective, the ECB has unexpectedly emerged as one of the most hawkish central banks, which could bolster the Euro as long as there are no contagion effects in the European banking sector." Said the bank’s research.Japan Exports/Imports/Merchandise Trade Balanceis scheduled for release on Thursday at 13:15 GMT.
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