- The EUR/JPY maintains its position about a maximum of 11 months of 169.72, reached on Monday.
- The Japanese yen gains ground due to the hopes of more rates of rates by the BOJ in the next month.
- Villeroy of the ECB pointed out that the Central Bank could cut interest rates.
The EUR/JPY remains stable after registering losses of more than 0.50% in the previous session, quoting around 169.30 during Thursday’s Asian hours. However, the Currency Crossing faced challenges since the Japanese Yen (JPY) received support while the operators still expect more rates of rates by the Bank of Japan (BOJ) in the next month.
The latest data showed that the underlying inflation of Japan rose to a maximum of more than two years in May and remained above the 2% target of the central bank, along with a PMI of Japan better than expected, keeping the door open for rates ups.
However, the Boj’s summary indicated that many policy managers asked to maintain interest rates without changes for some time amid the uncertainty about the impact of US tariffs on the Japanese economy. Many members also suggested that the effects of US tariff policies have not yet materialized, and the impact will undoubtedly exert down the feeling of companies.
On Thursday, the main commercial negotiator of Japan, Ryosei Akazawa, said that Japan cannot accept 25% tariffs on cars. Akazawa also said that officials will continue tariff conversations with the United States (USA).
The monetary policy of the European Central Bank (ECB), François Villeroy de Galhau, said Tuesday that the Central Bank could still cut interest rates despite the volatility observed in the oil market. “If we look at the current market evaluation so far, inflation expectations remain moderate,” Villey added.
Meanwhile, the head economist of the ECB, Philip Lane, said that “our monetary policy will have to take into account not only the most likely path (the baseline) but also the risks to activity and inflation,” according to Reuters.
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.
