The EUR/JPY pair grapples with uncertainty, hovering around 159.20 during the Asian session on Friday, following a volatile previous day. The Euro (EUR) found support after the release of a mixed bag of Eurozone inflation data on Thursday, contributing to the stabilization of the EUR/JPY cross.
In January, the Eurozone preliminary Core Harmonized Index of Consumer Prices (YoY) exhibited a 3.3% increase, surpassing expectations of 3.2%, yet slightly lower than the previous 3.4%. The annual Consumer Price Index met projections at 2.8%, aligning with the previous reading of 2.9%. However, the month-over-month report revealed a 0.4% decline, contrasting with the 0.2% rise observed in December.
Despite these figures, the Euro faced headwinds due to mounting market expectations of an impending interest rate cut by the European Central Bank (ECB) in June. This sentiment was fueled by softer preliminary Consumer Price Index (CPI) data from Germany, potentially acting as a hindrance to the advancement of the EUR/JPY cross.
Adding to the Euro’s challenges, ECB member Mario Centeno hinted at the possibility of rate cuts if inflation continues its current trajectory in the coming months. Such a move could mark the initiation of a rate normalization cycle.
Conversely, the Bank of Japan (BoJ) maintained a hawkish stance, boosting the Japanese Yen (JPY) as investors sought its safe-haven qualities amid heightened geopolitical tensions in the Middle East.
Foreign investment trends in Japan for the week ending January 26 showcased a notable turnaround, with Foreign Bond Investment recording inflows of ¥382.9 billion, a significant shift from the previous week’s outflows of ¥-43.5 billion. Additionally, Foreign Investment in Japanese Stocks rebounded, reaching ¥720.3 billion, compared to the previous week’s ¥287 billion. The evolving dynamics between the Euro and the Yen continue to shape the EUR/JPY landscape amidst global economic uncertainties and central bank signals.