- The EUR/JPY rises to around 162.20 in the Asian session on Monday.
- The EU considers adjusting methane rules for American gas to help in commercial negotiations, Reuters reported.
- The growing expectations of a rise up of the BOJ could boost the JPY and limit the bullish potential of the crossing.
The EUR/JPY crossing is in positive territory for the fourth consecutive day about 162.20 during Monday’s Asian negotiation hours. The Euro (EUR) is strengthened against Japanese Yen (JPY) in the middle of commercial negotiations signals between the US and the European Union.
The trade war of US President Donald Trump remains a source of deep uncertainty. However, the European Commission is working on its offer for commercial negotiations with the US to try to avoid tariffs planned by Trump, with both parties pointing out that energy could be part of a broader commercial agreement. Optimism about commercial negotiation could provide some support to the common currency against JPY in the short term.
The upward potential for the euro could be limited due to the DOVISH posture of the European Central Bank (ECB). The ECB decided to reduce its main interest rate by a percentage quarter to 2.25% at its April meeting last week. The president of the ECB, Christine Lagarde, said during the press conference that US tariffs on EU assets, which had increased from an average from 3% to 13%, were already harming the prospects for the European economy.
On the other hand, the growing speculation that the Bank of Japan (BOJ) will continue to increase interest rates could raise the JPY and act as a wind against the Eur/JPY. The governor of the Boj, Kazuo Ueda, said last week that the real interest rates of Japan are still very low and that the Boj is expected to continue increasing interest rates if the economy and prices move in line with the projections. The opinion was reaffirmed by the member of the Boj Board, Junko Nagakawa.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
