EUR/JPY fell 0.15% on Thursday to about 187.30, staying in a consolidation range above 187.00 that has held since early week. The move came as markets reviewed updated Eurozone inflation figures and awaited further ECB communication.
Revised data showed Eurozone HICP rose 1.3% month-on-month in March, up from 0.6% in February and above the 1.2% initial estimate. Annual HICP was revised to 2.6% from 1.9%, the highest since July 2024, while core inflation eased to 2.3% year-on-year from 2.4%.
Eurozone Inflation And ECB Focus
Energy prices were cited as a main driver of higher headline inflation, with attention shifting to the ECB meeting on 29–30 April. ECB President Christine Lagarde said the bank must remain “completely agile” on rates and that policymakers do not have a bias towards tightening.
Markets still expect two 25-basis-point hikes this year, with limited odds for April. Reuters reported a first hike is now almost fully priced in by June.
In Japan, Finance Minister Satsuki Takayama said Japan and the US agreed to strengthen exchange-rate communication after talks with US Treasury Secretary Scott Bessent. Officials reiterated an aim to limit excessive yen weakness, with little immediate market impact.
With EUR/JPY consolidating above 187.00, our focus shifts to the upcoming European Central Bank meeting at the end of April. The current quiet price action suggests a larger move is building, making this an ideal time to consider volatility plays. The uncertainty around the ECB’s next step is creating a tense waiting game.
The case for a stronger Euro is supported by the new inflation figures, which show headline inflation at 2.6%, well above the ECB’s 2% target. Financial markets are now pricing in a 90% probability of a 25-basis-point rate hike by the June meeting, a significant shift in expectations. This pressure could force the ECB to adopt a more hawkish stance, which would likely push EUR/JPY higher.
Intervention Risk And Options Strategy
However, we must also weigh the risk of Japanese intervention and a cautious ECB. Japanese officials are clearly uncomfortable with yen weakness, and we saw how effective their direct market intervention was back in late 2022 when they spent over ¥9 trillion to support the currency. Meanwhile, the slight easing in core Eurozone inflation to 2.3% gives ECB President Lagarde the justification she needs to delay any rate hikes and maintain an “agile” approach.
When we look at the trading environment of 2025, we recall how the widening interest rate gap between a steady ECB and an ultra-dovish Bank of Japan drove much of the yen’s weakness. That trend pushed EUR/JPY up significantly throughout the second half of last year. The current situation feels like a potential turning point from that well-established trend.
Given the binary risk of the ECB meeting on April 30, buying options seems prudent. A long straddle, purchasing both a call and a put option with a strike price near the current 187.30 and an expiry in mid-May, would position us to profit from a significant price breakout in either direction. This strategy lets us capitalize on the coming volatility without having to predict the exact outcome of the central bank’s decision.
