Euro gains against Japanese Yen on more ECB interest rate hike hopes

The Euro (EUR) trades higher 0.12% higher to near 185.45 against the Japanese Yen (JPY) during the European trading session on Friday. The cross gains as the Euro (EUR) outperforms its major currency peers, except the US Dollar (USD), amid hopes that the European Central Bank (ECB) will deliver one interest rate hike this year to counter de-anchored inflation expectations in the wake of the Middle East crisis.

Analysts at Deutsche Bank expect the ECB to deliver one more interest rate hike in September after a 25 basis points (bps) increase on Thursday. In the policy announcement, the ECB raised its key borrowing rates by quarter-to-a-percent, as expected, and warned that short-term inflation expectations have risen.

ECB President Christine Lagarde stated that the central bank will remain vigilant to inflation risks. “Will monitor size, persistence of energy price increase," Lagarde said.

Meanwhile, the Japanese Yen trades lower against its major peers, except antipodeans, amid caution ahead of the Bank of Japan’s (BoJ) monetary policy decision on Tuesday. According to the latest Reuters poll, the BoJ is expected to raise interest rates by 25 basis points (bps) to 1%.

The monetary policy meeting will be conducted in the absence of the BoJ Governor Kazuo Ueda, as he was hospitalized on June 10.