nterest Rate Differential
European Central Bank (ECB):
Deposit rate: 2.25% (cut by 25 bps in April 2025).
Outlook: Markets expect two more cuts in 2025, potentially lowering rates to 1.75% by year-end, as tariff risks and weak growth persist.
Bank of Japan (BoJ):
Policy rate: 0.50% (held steady in May).
Outlook: BoJ lowered its 2025 GDP growth forecast to 0.5% (from 1.0%) due to U.S. tariff risks and weak Q1 data. Rate hikes are unlikely until 2026.
Differential: ~1.75% in favor of EUR, though ECB easing may narrow this gap.
Key Economic Data for May 2025
Eurozone
Q1 GDP Growth (Final):
0.3% QoQ (vs. preliminary 0.4%), marking the fifth straight quarter of growth.
Germany (+0.2%), Spain (+0.6%), and Italy (+0.3%) outperformed France (+0.1%).
Risks: U.S. tariffs on EU exports (potentially 20% starting July) threaten future growth.
ECB Policy Signals:
ECB President Lagarde emphasized a data-dependent approach, with further cuts likely if inflation remains subdued.
Japan
Q1 GDP Contraction:
-0.7% annualized (vs. -0.2% expected), driven by weak exports (-5.0%) and stagnant consumption.
U.S. tariffs on Japanese autos (24%) and machinery exacerbate recession risks.
BoJ Caution:
Governor Ueda warned of "downside risks" from trade tensions, signaling no near-term rate hikes despite inflation above target.
Directional Bias for EUR/JPY
Short-Term (May–June 2025): Bullish EUR/JPY
ECB’s higher rates (vs. BoJ’s 0.50%) sustain the euro’s yield advantage.
Japan’s weak GDP and tariff vulnerabilities keep JPY under pressure.
Medium-Term (H2 2025): Neutral-to-Bearish
ECB rate cuts (to 1.75%) could narrow the rate differential, reducing EUR appeal.
Safe-haven JPY demand may rise if U.S.-EU/Japan tariff tensions escalate.
#SHAVYFXHUB #EURJPY #JAPAN #EUROPE #EURO #yen #fx #forex
European Central Bank (ECB):
Deposit rate: 2.25% (cut by 25 bps in April 2025).
Outlook: Markets expect two more cuts in 2025, potentially lowering rates to 1.75% by year-end, as tariff risks and weak growth persist.
Bank of Japan (BoJ):
Policy rate: 0.50% (held steady in May).
Outlook: BoJ lowered its 2025 GDP growth forecast to 0.5% (from 1.0%) due to U.S. tariff risks and weak Q1 data. Rate hikes are unlikely until 2026.
Differential: ~1.75% in favor of EUR, though ECB easing may narrow this gap.
Key Economic Data for May 2025
Eurozone
Q1 GDP Growth (Final):
0.3% QoQ (vs. preliminary 0.4%), marking the fifth straight quarter of growth.
Germany (+0.2%), Spain (+0.6%), and Italy (+0.3%) outperformed France (+0.1%).
Risks: U.S. tariffs on EU exports (potentially 20% starting July) threaten future growth.
ECB Policy Signals:
ECB President Lagarde emphasized a data-dependent approach, with further cuts likely if inflation remains subdued.
Japan
Q1 GDP Contraction:
-0.7% annualized (vs. -0.2% expected), driven by weak exports (-5.0%) and stagnant consumption.
U.S. tariffs on Japanese autos (24%) and machinery exacerbate recession risks.
BoJ Caution:
Governor Ueda warned of "downside risks" from trade tensions, signaling no near-term rate hikes despite inflation above target.
Directional Bias for EUR/JPY
Short-Term (May–June 2025): Bullish EUR/JPY
ECB’s higher rates (vs. BoJ’s 0.50%) sustain the euro’s yield advantage.
Japan’s weak GDP and tariff vulnerabilities keep JPY under pressure.
Medium-Term (H2 2025): Neutral-to-Bearish
ECB rate cuts (to 1.75%) could narrow the rate differential, reducing EUR appeal.
Safe-haven JPY demand may rise if U.S.-EU/Japan tariff tensions escalate.
#SHAVYFXHUB #EURJPY #JAPAN #EUROPE #EURO #yen #fx #forex
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.