Snapshot: EUR/JPY at 186.15, up 0.22% on the session, fueled by the prospect of further ECB easing. The 2bp rise in the German 2-year Schatz yield is being overshadowed by growing anticipation for further rate cuts following April’s 25bp move. Focus now shifts to the 11:00 CET Eurozone CPI Flash Estimate.
- Watch for the Eurozone Core CPI Flash Estimate; a print below 2.4% would solidify expectations for a June ECB cut.
- Rising MoF/BoJ communication risk around Yen weakness past prior intervention zones could trigger a sharp reversal.
Bias into NY: Bullish EUR/JPY while the market prices further ECB easing into the short end; a decisive break above 186.21 opens a path towards 186.50. DXY weakness is providing a tailwind, but the domestic easing narrative is in the driver’s seat.