EUR/JPY Monthly Fundamental Forecast March 2014

Outlook and Recommendation

The EUR/JPY  climbed at the end of the month to close at 140.93 as inflation data in the eurozone came in higher than expected easing tensions for the ECB. Deflation concerns persist in the context of a still strong euro and weak domestic demand, though the case for immediate policy action by the European Central Bank (ECB) was tempered by higher-than-expected inflation readings in the opening months of the year. The ECB will remain in data-watching mode over the coming months.

Euro zone real GDP growth in the fourth quarter was somewhat stronger than anticipated, with the recovery gaining strength in virtually every economy. Export activity continues to fuel the recovery, while sustained momentum on the domestic side, particularly in consumption, still appears some way off.

Inflation is slowly approaching the Bank of Japan’s (BoJ) 2% inflation target. The consumer price index (of all items less fresh food) was 1.3% y/y in February; the April tax rate increase will temporarily bring it to the target in mid-2014. Apart from this, significant yen depreciation combined with the central bank’s monetary stimulus efforts should translate into modest price gains in the coming quarters, though the inflation rate will likely remain around 1½% y/y at the end of 2014. Accordingly, the BoJ will continue its quantitative and qualitative monetary easing scheme in the coming quarters; following the February 18th meeting the central bank extended and increased its bank lending facilities to support the economy. There is potential for further quantitative easing measures in the near term if the tax rate hike leads to a stalling of ongoing economic momentum

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our  weekly reports and we provide daily updates and outlooks.  

Central Bank Name – European Central Bank

Date of next meeting: March 6, 2014

Current Rate: 0.25%

 

Economic events for the month of February affecting AUD, JPY, NZD and USD