EUR/JPY falls to near 159.00 amid rising wages in Japan

EUR/JPY depreciates as rising wages bolster the odds of the BoJ rate hikes again.
Japan’s Labor Cash Earnings jumped 4.8% YoY in December, rising from 3.9% in November.
The Euro remains under pressure as investors brace for a potential Trump's tariff targeting the Eurozone.

Akhtar Faruqui FXStreet

EUR/JPY retreats after gains in the previous session, trading near 159.00 during Asian hours on Wednesday. The decline of the EUR/JPY cross is driven by a stronger Japanese Yen (JPY), supported by rising wages in Japan and growing expectations that the Bank of Japan (BoJ) will further hike interest rates.

Japan’s Labor Cash Earnings surged 4.8% year-on-year in December, up from 3.9% in November, exceeding the market forecast of 3.8%. This marks the highest wage growth in nearly three decades. Additionally, inflation-adjusted real wages, which indicate consumer purchasing power, increased by 0.6% in December, recording a second consecutive month of positive growth.

More on data, the Jibun Bank Composite Purchasing Managers’ Index (PMI) rose to 51.1 in January 2025 from 50.5 in December, signaling the third straight month of expansion in private sector activity. Meanwhile, the Services PMI was revised upward to 53.0 from a preliminary estimate of 52.7, following a final reading of 50.9 in the prior month.

EUR/JPY may face further downside as the Japanese Yen finds additional support from safe-haven flows amid escalating US-China trade tensions. On Wednesday, the US Customs and Border Protection announced that new tariffs of 10% would be applied to both Hong Kong and mainland China.

The Euro (EUR) remains under pressure as investors anticipate potential tariff threats from US President Donald Trump against the Eurozone. Over the weekend, Trump stated that he would “definitely” impose tariffs, accusing the bloc of unfair trade practices by not purchasing enough US cars and farm products. He claimed that the EU “takes almost nothing, and we take everything from them.”

In response, French President Emmanuel Macron warned that the European Union (EU) would retaliate if its interests were threatened. “If our commercial interests are attacked, Europe, as a true power, will have to make itself respected and therefore react,” Macron stated, as reported by The Guardian.

Economic Indicator

Labor Cash Earnings (YoY)

This indicator, released by the Ministry of Health, Labor and Welfare, shows the average income, before taxes, per regular employee. It includes overtime pay and bonuses but it doesn't take into account earnings from holding financial assets nor capital gains. Higher income puts upward pressures on consumption, and is inflationary for the Japanese economy. Generally, a higher-than-expected reading is bullish for the Japanese Yen (JPY), while a below-the-market consensus result is bearish.

AUD/USD hovers around 0.7000, over one-week low ahead of RBA decision

AUD/USD consolidates the previous day's losses to an over one-week low, holding steady around 0.7000 during the Asian session on Tuesday ahead of the RBA rate decision. Meanwhile, the US Dollar remains depressed as hopes for a diplomatic resolution to end the US-Iran war counter Fed hike bets amid market anxiety ahead of the US midterm elections, further supporting the currency pair.

USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.

Gold consolidates near $3,950 as Fed hike bets counter weak USD ahead of US elections

Gold holds steady around $3,950 through Tuesday’s Asian session, consolidating the previous day's recovery gains from the lowest level since October 2025, touched last week. Hopes for Iran optimism keep the safe-haven US Dollar depressed, which, along with anxiety ahead of US midterm elections, supports the bullion. However, Fed rate-hike bets and a modest bounce in US bond yields cap gains for the non-yielding yellow metal.

RBA expected to raise interest rate to 4.85%

The Reserve Bank of Australia will announce its monetary policy decision on Tuesday and is widely anticipated to raise the Official Cash Rate by 25 basis points to 4.85% from 4.6%. If the RBA delivers as expected, it will be the fifth interest rate hike of 2026, and the OCR will hit an 18-year high.

Strong iPhone sales fortify Apple's Q4 result

A robust fourth-quarter for Apple's iPhone sales helped the tech titan beat Wall Street's consensus on Monday. Apple reported $57.58 billion in iPhone sales in Q4, beating the average analyst estimate by more than a billion. However, AAPL stock shed close to 4% afterhours despite the top and bottom line beat.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.