EUR/JPY briefly traded below 139 at the height of the US banking crisis only to trade to 145 as conditions settled. Economists at ING expect the pair to drop substantially toward 135 in the coming quarters.

Downside looks more inviting

“We suspect the risk environment remains fragile – the KBW US Regional Banking index continues to drop – and that EUR/JPY can turn lower again.”

“We look for 25 bps hikes from the ECB in May and June, but no cuts until the third quarter of next year. The BoJ is at the other end of the spectrum, turning less dovish and possibly even hiking rates early in 2024.”

“EUR/JPY is normally a good barometer for global growth and the forthcoming downturn favours a multi-quarter drop to 135.”