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EUR/JPY declines as geopolitical tensions, hawkish BoJ boost Yen

  • EUR/JPY edges lower around 182.90 on Wednesday, pressured by renewed demand for the Japanese Yen.
  • Eurozone inflation slows in December, confirming a gradual easing of price pressures.
  • Rising geopolitical tensions in Asia and the BoJ’s still-hawkish tone support the Japanese currency.

EUR/JPY trades around 182.90 on Wednesday at the time of writing, down 0.10% on the day. The cross remains under pressure as the Japanese Yen (JPY) benefits from a more defensive market environment, amid rising geopolitical tensions in Asia and continued firm signals from the Bank of Japan (BoJ).

On the European side, the latest data published by Eurostat show that the Eurozone Harmonized Index of Consumer Prices (HICP) rose by 2% YoY in December, in line with market expectations, after 2.1% in November. On a monthly basis, inflation increased by 0.2%, following a 0.3% decline in the previous month. Core inflation, which excludes volatile components such as food and energy, also slowed to 2.3% on an annual basis from 2.4%, confirming a gradual easing of inflationary pressures across the monetary union.

These figures, however, come against a still-fragile economic backdrop, particularly in Germany. Retail Sales there declined by 0.6% in November, after a 0.3% drop in October, running counter to market expectations. At the same time, German Harmonized Index of Consumer Prices inflation slowed sharply in December, reinforcing the view that price dynamics remain subdued in the Eurozone’s largest economy. Activity indicators also point to some loss of momentum, with the Eurozone Services Purchasing Managers Index (PMI) revised lower for December.

In Asia, the Japanese Yen is supported by a clear deterioration in risk appetite. On Tuesday, tensions between China and Japan escalated after Beijing announced a ban on exports of dual-use goods to Japan, in retaliation for comments by Japanese Prime Minister Sanae Takaichi regarding Taiwan. This diplomatic escalation between the world’s second- and third-largest economies has reignited geopolitical concerns and boosted demand for the JPY as a safe-haven currency.

Additional support comes from remarks by BoJ Governor Kazuho Ueda, who reiterated the institution’s commitment to further monetary tightening. Although investors remain cautious about the exact timing of the next interest rate hike, this hawkish bias continues to provide structural support to the Japanese Yen. That said, concerns surrounding Japan’s fiscal situation could limit the enthusiasm of JPY bulls and cap the extent of EUR/JPY downside in the near term.

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.00%0.05%-0.08%0.00%0.08%-0.08%0.06%
EUR0.00%0.05%-0.07%0.00%0.08%-0.08%0.06%
GBP-0.05%-0.05%-0.13%-0.04%0.03%-0.13%0.02%
JPY0.08%0.07%0.13%0.09%0.16%-0.01%0.14%
CAD-0.01%-0.01%0.04%-0.09%0.07%-0.10%0.04%
AUD-0.08%-0.08%-0.03%-0.16%-0.07%-0.16%-0.02%
NZD0.08%0.08%0.13%0.01%0.10%0.16%0.15%
CHF-0.06%-0.06%-0.02%-0.14%-0.04%0.02%-0.15%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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