EUR/JPY struggles around 143.50 ahead of Japan’s GDP and ECB Lagarde’s speech

• EUR/JPY is facing barricades in extending its rally above 143.50.
• The speech from Christine Lagarde will dictate the likely monetary policy action by the ECB ahead.
• A contraction in Japan’s GDP may force more policy easing by the BOJ.

The EUR/JPY pair has sensed selling pressure after struggling to surpass the critical hurdle of 143.50 in the Asian session. The cross is displaying signs of exhaustion in the upside momentum after a juggernaut rally from below 141.00 on Monday. Monday’s rally in the cross got wings after the release of the downbeat Eurozone Retail Sales data.

Monthly Eurozone Retail Sales data contracted by 1.8% while expectations were aiming for a 1.7% contraction. Also, the economic data contracted by 2.7% on an annual basis against the consensus of a 2.6% contraction. A decline in demand by the households indicates that policy tightening measures adopted by the European Central Bank (ECB) are augmenting their job effectively. This might force firms to look for a decline in prices for goods and services to keep up their sales.

No doubt, a decline in retail demand is clear evidence that inflation will fall ahead but the size of the inflation monster is extremely large from the targeted inflation rate of 2%. This may force the ECB to continue hiking interest rates further.

Meanwhile, European Economy Commissioner Paolo Gentiloni said on Monday Europe will fall into a recession this winter and growth will not return before spring before the Eurogroup meeting, reported by Deccan Herald. He further added that “Inflation Seems to Be Peaking, Decline to Be Gradual.”

Going forward, investors will look for the speech from ECB President Christine Lagarde, which is scheduled for Thursday. The speech from ECB President will dictate the likely monetary policy action by the ECB in its December monetary policy meeting.

On the Tokyo front, the release of the Gross Domestic Product (GDP) data for the third quarter will be of significant importance. On an annualized basis, Japan’s GDP is expected to contract by 1.1% against the prior contraction of 1.2%. Also, the quarterly data is expected to contract by 0.3%, similar to the prior print. A contraction in Japan’s GDP may force more policy easing by the Bank of Japan (BOJ).