The Euro is benefiting from a risk-on sentiment and anticipation of central bank easing, while the Yen is holding steady despite hints of a future policy change by the BoJ.

The Euro (EUR) is gaining traction against the US Dollar (USD) on Tuesday, propelled by rising risk appetite and expectations of a dovish turn by major central banks. The current EURUSD rate sits at 1.1023, with markets generally quiet due to Christmas and year-end holidays.

Investor optimism stems from speculation that the US Federal Reserve and European Central Bank may loosen their monetary policies in the coming year. This potential shift away from tightening is particularly favorable for the Euro, which is seen as a riskier asset compared to the safe-haven USD. However, concrete action from the central banks is unlikely before the first quarter of 2024.

Meanwhile, the Japanese Yen (JPY) remains stable against the USD at 142.22. While inflation in Japan currently exceeds the Bank of Japan’s (BoJ) target of 2%, Governor Kazuo Ueda has hinted at a potential shift away from ultra-loose monetary policy. However, the timing of any such move remains uncertain due to economic and market volatility. The market still expects the BoJ to end its negative interest rate policy in the first half of 2024.

Key Takeaways:

• EUR gains on positive sentiment and ECB expectations.
• JPY stable as BoJ hints at future policy change.
• Low trading activity due to holidays.