EUR/JPY trades higher around 166.00 amid improving risk appetite

• EUR/JPY rises due to the general positive sentiment in the market after the Fed's decision.
• Recent Eurozone inflation data has reinforced expectations of a possible rate cut by the ECB in June.
• The Japanese Yen experienced a rally during the morning driven by possible intervention by the Japanese authorities.

EUR/JPY advances on Thursday as prevailing positive market sentiment provides support to risk-sensitive currencies such as the euro. The pair is trading around 166.10 during the European session. This improved risk appetite could be attributed to Federal Reserve Chair Jerome Powell's dovish comments on Wednesday. Powell ruled out the likelihood of further interest rate hikes.

The European Central Bank (ECB) is expected to be dovish as recent inflation data showed that the Eurozone CPI remained stable in April, as expected. In addition, core inflation fell, reinforcing bets on a possible interest rate cut by the ECB in June. This could dampen demand for the Euro and consequently undermine the EUR/JPY cross.

The Eurozone HCOB Manufacturing Purchasing Managers' Index (PMI) for April recorded a reading of 45.7, compared to the preliminary estimate of 45.6 and below the final figure of 46.1 in March. This latest reading indicates a slight acceleration in the rate of decline of the manufacturing sector in the Eurozone. The entry of new orders decreased at a steeper pace, marking the most significant decline so far this year.

In Japan, the Japanese Yen (JPY) initially saw a rise during the morning hours, driven by speculation of another possible government intervention, marking the second such event this week. However, it later gave up its gains following the release of the Bank of Japan (BoJ) March meeting minutes.

According to Reuters, one member stated that the economy's reaction to a rise in short-term rates to around 0.1% is expected to be minimal. Several members expressed the view that long-term rates should be determined primarily by market forces. Additionally, some members suggested that the Bank of Japan should consider reducing its bond purchases and reducing its bond holdings.

The consumer confidence index fell to 38.3 in April from 39.5 in March and was below market expectations of 39.7. This decline marks the lowest level in three months, reflecting weakening sentiment among households.