EUR/JPY posts modest gains near 172.50 ahead of ECB rate decision

• EUR/JPY trades with mild gains around 172.50 in Thursday's Asian session.
• Political uncertainty in Japan weighs on the Japanese Yen and acts as a tailwind for the cross. 
• ECB is anticipated to hold rates again at its September meeting on Thursday. 

The EUR/JPY cross posts modest gains near 172.50, snapping the four-day losing streak during the Asian trading hours on Thursday. Expectations that political uncertainty in Japan could give the Bank of Japan (BoJ) more reasons to delay interest rate hikes weigh on the Japanese Yen (JPY). Traders await the European Central Bank (ECB) interest rate decision later on Thursday, with no change in rates expected. 

Japanese Prime Minister Shigeru Ishiba announced over the weekend that he will resign. The appointment of a new Japanese Prime Minister next month could offer the BoJ extra room to delay its next interest rate hike, especially if the next leader is concerned about borrowing prices rising too rapidly. Uncertainty around who becomes Prime Minister and what their policies might be could undermine the JPY and create a tailwind for the cross. 

On the Euro front, the ECB is set to leave interest rates unchanged at its September meeting on Thursday as inflation remains in line with the target. Analysts expect the ECB to take up a "wait-and-see" approach and cut rates in December. The attention will shift to the ECB Press Conference following the policy decision. 

ECB President Christine Lagarde's hawkish remarks in July reduced expectations of further reduction this month. Lagarde is unlikely to close the door on further rate cuts, especially since inflation is forecast to drop below the ECB's 2% target next year. However, any surprise dovish comments from ECB officials could drag the shared currency lower in the near term.