EUR/JPY drops below 141.00 despite hawkish ECB bets amid Credit Suisse debacle
- The recovery move from EUR/JPY has met resistance at 141.60 and has dropped to near 140.50.
- ECB Lagrade is expected to continue her sheer hawkish stance on the interest rate policy despite Credit Suisse's turmoil.
- Japan Kishida is aiming to raise minimum wages beyond JPY¥1,000 to sustain inflation above the desired target.
The EUR/JPY pair has surrendered the immediate support of 141.00 as the debate over the continuation 50 basis points (bps) interest rate hike by the European Central Bank (ECB) is getting ugly. After the debacle of Credit Suisse due to its ‘material weakness’ in internal controls over financial reporting, the street believes that a global banking crisis is brewing and the ECB could slow down its pace of hiking interest rates.
Considering the stubborn inflation in the Eurozone economy led by resilient consumption and tight labor demand, ECB President Christine Lagarde is expected to continue her sheer hawkish stance on the interest rate policy. Therefore, a consecutive third 50 bps rate is expected in the interest rate decision by the ECB.
Reuters reported that “Despite the turmoil in the banking sector, policymakers expect inflation to remain too high in the Eurozone.” Additionally, the Governing Council doesn't want to damage its credibility by ditching the 50 bps rate increase after having repeatedly noted that this was their intention.
Considering the statement from Credit Suisse chairman Axel Lehmann that state assistance "isn't a topic" for the bank as it seeks to recover from a string of scandals that have undermined the confidence of investors and clients, Bloomberg reported, the downfall of Credit Suisse is not expected to heal sooner.
On the Japanese Yen front, Bank of Japan (BoJ) policymakers and Japanese officials are pulling their socks to provide a cushion to inflation to remain steady above the 2% target. Japan’s PM Fumio Kishida said on Wednesday that they are aiming to raise minimum wages beyond JPY¥1,000 nationwide. Superlative wage gains are going to add effectively to the upside filters for the inflationary pressures as households will be equipped with more funds for disposal.