The EUR/JPY currency pair remains stable near 160.75 during the early European session on Friday. The Euro (EUR) is receiving modest support from the latest German inflation data, while safe-haven flows driven by ongoing geopolitical tensions in the Middle East may strengthen the Japanese Yen (JPY) and limit further gains for the cross.
Germany’s Harmonized Index of Consumer Prices (HICP) rose by 2.6% year-on-year in July, according to Destatis, matching market expectations. The month-over-month HICP inflation remained steady at 0.5% for July.
The European Central Bank (ECB) recently reduced interest rates from 4% to 3.75%. However, ECB President Christine Lagarde indicated that the outlook for further policy easing remains uncertain, with no firm plans for additional cuts in September.
Conversely, dovish remarks from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida on Wednesday are putting downward pressure on the JPY. JP Morgan Asset Management (JPAM) suggests that the BoJ is unlikely to raise rates in the near term, with any potential hikes possibly occurring in 2025 if global economic conditions remain stable. Additionally, Japan’s Finance Minister Shunichi Suzuki stated on Thursday that while monetary policy decisions are the responsibility of the BoJ, they will closely monitor market developments, as reported by Reuters.
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