EUR/JPY gains ground above 161.50 ahead of ECB's Lagarde speech

• EUR/JPY drifts higher to 161.65 in Monday's Asian session, up 0.22% on the day. 
• The BoJ is expected to keep rates on hold on Thursday. 
• Hope for political stability after Macron appointed a new Prime Minister lifts the EUR, but ECB's dovish shift might cap its upside. 

The EUR/JPY cross gains traction to near 161.65 during the early European session on Monday. The Japanese Yen (JPY) weakens amid the growing speculation that the Bank of Japan (BoJ) will keep interest rates steady in the December meeting on Thursday. Later on Monday, the preliminary Eurozone December Purchasing Managers' Index (PMI) data will be released. Also, the European Central Bank (ECB) President Christine Lagarde is set to speak later in the day. 

The BoJ is scheduled to hold its last policy meeting of the year on December 18-19. The markets are currently pricing in less than a 30% chance of a rate hike in December. Several BoJ policymakers appear to be in no rush to tighten their monetary policy further with little risk of inflation overshooting despite Japan's still near-zero borrowing costs. This, in turn, exerts some selling pressure on the JPY and creates a tailwind for EUR/JPY. 

On the Euro front, French President Emmanuel Macron named François Bayrou, a centrist ally, as prime minister on Friday. The hope for political stability provides some support to the shared currency. However, the upside for the EUR might be capped as the ECB opens the door for further rate cuts. 

The ECB cut interest rates by a quarter point to 3.0% last week and warned that growth would be weaker than it had previously forecast. Traders in swaps markets anticipate the ECB to carry out a further five quarter-point cuts by next September, which would take the deposit rate to 1.75%.