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EUR/JPY edges higher as policy caution, Middle East war temper Yen strength

  • EUR/JPY trades around 186.70 with a modest gain at the end of the week.
  • Markets expect major central banks to hold rates steady while highlighting persistent inflation risks.
  • Middle East tensions and uncertainty around Japanese policy shape Yen dynamics.

EUR/JPY trades around 186.70 on Friday, posting a modest 0.06% gain as investors remain cautious ahead of a week marked by monetary policy decisions from several major central banks. The pair is supported by a broadly resilient Euro (EUR), while facing mixed flows on the Japanese Yen (JPY).

Market expectations indicate that interest rates will remain unchanged from both the Bank of Japan (BoJ) and the European Central Bank (ECB), with guidance emphasizing a data-dependent approach. However, the recent rise in energy prices, driven by the prolonged closure of the Strait of Hormuz, is fueling upside inflation risks, potentially complicating any near-term easing outlook.

Within the ECB, some policymakers remain cautious but open to further tightening if needed. Governing Council member Gediminas Simkus stated that a rate hike this year cannot be ruled out, while dismissing the possibility of a hike at the April 30 meeting. This stance provides support to the Euro, despite weakening economic indicators.

Indeed, the latest data from Germany highlight a sharper-than-expected deterioration in business sentiment. The IFO Business Climate Index declined to 84.4 in April, below expectations, indicating a worsening economic outlook in the Eurozone’s largest economy and limiting the Euro’s upside potential.

In Japan, the Japanese Yen remains influenced by conflicting factors. On one hand, speculation about potential intervention and comments from the Finance Ministry offer some support to the currency. On the other hand, economic concerns tied to rising energy prices and disruptions in the Strait of Hormuz weigh on confidence.

The Bank of Japan (BoJ) is expected to keep its policy rate unchanged at 0.75% at its upcoming meeting, while leaving the door open to future tightening. Recent inflation data show moderate progress, with headline inflation at 1.5% YoY and core measures still below the 2% target, justifying a cautious stance.

Euro Price Today

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

USDEURGBPJPYCADAUDNZDCHF
USD-0.03%-0.12%0.00%-0.08%-0.03%-0.07%0.06%
EUR0.03%-0.09%0.00%-0.05%0.00%-0.02%0.10%
GBP0.12%0.09%0.00%0.04%0.09%0.09%0.18%
JPY0.00%0.00%0.00%-0.09%-0.04%-0.07%0.04%
CAD0.08%0.05%-0.04%0.09%0.04%0.01%0.14%
AUD0.03%0.00%-0.09%0.04%-0.04%-0.04%0.08%
NZD0.07%0.02%-0.09%0.07%-0.01%0.04%0.12%
CHF-0.06%-0.10%-0.18%-0.04%-0.14%-0.08%-0.12%

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).

(This story was corrected at 11:00 GMT to say that Simkus dismissed the possibility of a hike at the April 30 meeting, and not a cut.)

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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