• ECB's rate cut to 3% aims to anchor inflation closer to the 2% target amid ongoing economic challenges.
• Updated ECB forecasts suggest a gradual decline in inflation, with HICP expected to reach 1.9% by 2026.
• Market attention now turns to ECB President Christine Lagarde's upcoming press conference for further cues.

The Euro weakens against the Japanese Yen during the North American session after the European Central Bank (ECB) cut interest rates. At the time of writing, the EUR/JPY trades volatile within the 159.00-159.80 range.
 

EUR/JPY experiences volatility, after ECB slashes interest rates and updated its forecasts

The ECB lowered their three key interest rates by 25 bps, leaving the deposit rate at 3%. The monetary policy statement mentioned that the central bank is determined to drive inflation to its 2% goal, adding they’re not pre-committed toa particular rate path.

ECB officials added that the disinflation is “well on track” and despite evolving, inflation remains high.

In its meeting, the ECB updated its forecasts for inflation and economic growth. The Harmonised Index of Consumer Prices (HICP) for 2024 is expected to end at 2.4%, down from 2.5%. For 2025 and 2026, HICP is foreseen to end at 2.1% and 1.9%, respectively.

Core HICP is projected to finish the year at 2.9%, unchanged compared to the previous forecast, and for 2025 and 2026 is foreseen to dip to 2.3% and 1.9%, respectively.

The Gross Domestic Product is foreseen at 0.7% I n2024, at 1.1% in 2025 and 1.4% in 2026.

Following the monetary statement release, traders focus shifts to ECB’s President Christine Lagarde press conference at around 13:45 GMT.
 

EUR/JPY Price Forecast: Technical outlook

The EUR/JPY extended its losses below 160.00, with traders eyeing a re-test of the December 11 low of 158.64. On further weakness, the cross-pair could dive towards the Tenkan-Sen at 158.45, before sliding to 158.00.

Conversely, if buyers push the exchange rate above 160.00, this could pave the way to test the Kijun-Sen at 161.07.

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