EUR/JPY extends the rally below 162.00, all eyes on BoJ rate decision

• EUR/JPY holds positive ground for the third consecutive day near 161.85 on Thursday. 
• BoJ’s Ueda comments and risk-on mood weigh on the Japanese Yen against the Euro. 
• ECB’s Galhau said it will probably start cutting rates during the spring as a victory against inflation is in sight.

The EUR/JPY cross extends its upside below the 162.00 psychological barrier during the Asian trading hours on Thursday. The diminishing possibility of ending negative interest rates by the Bank of Japan (BoJ) exerts some selling pressure on the Japanese Yen. At press time, EUR/JPY is trading at 161.85, adding 0.05% on the day. 

Most analysts anticipate that the Bank of Japan (BoJ) will exit its negative rate policy next week as Japanese policymakers have more evidence of a wage hike after the annual spring negotiations between unions and the biggest companies in Japan this week. However, BoJ Governor Kazuo Ueda offered a slightly bleaker assessment than in January, saying the economy was recovering but also showing some signs of weakness. Furthermore, the risk-on mood environment and bullish sentiment around the global equity markets weigh on the Japanese Yen (JPY) against the Euro (EUR). 

The European Central Bank policymaker Francois Villeroy de Galhau said on Wednesday that the central bank will probably start cutting rates during the spring, between April and June as the "victory" against inflation is in sight. Meanwhile, ECB Governing Council member Peter Kazimir stated that the central bank shouldn’t cut interest rates before June as it needs additional data to ensure that inflation has been tamed. 

Earlier this month, ECB President Christine Lagarde remarked that the first rate cuts would take place at the June meeting rather than in April. These dovish comments from the ECB policymakers might cap the upside of the EUR and act as a headwind for the EUR/JPY cross. 

Moving on, traders will keep an eye on Spain’s Consumer Price Index (CPI) on Thursday, along with the ECB’s Elderson, Schnabel, and De Guindos speeches. The CPI inflation data from France and Italy will be released on Friday. Next week, market players will shift their attention to the BoJ interest rate decision. This event might trigger volatility in the market and give a clear direction to the EUR/JPY cross.