EUR/JPY gains ground above 167.50 ahead of Eurozone GDP, inflation data

The EUR/JPY cross trades on a stronger note near 167.75 on Tuesday during the early European session. The cross edges higher despite a likely foreign exchange (FX) intervention by Japanese authorities on Monday. Market players will closely monitor the Gross Domestic Product (GDP) growth number for Q1 and the first reading of the Harmonized Index of Consumer Prices (HICP) from the Eurozone for fresh impetus. 

Early Tuesday, Japan's top currency diplomat, Masato Kanda, offered no comments on FX intervention but said that recent movements have been "speculative, rapid, and abnormal.” Kanda further stated that excessive FX moves could impact daily lives, and the Japanese authorities are ready to take action 24 hours a day. The fear of further FX intervention might provide some support to the Japanese Yen (JPY) in the near term and cap the upside of the cross.  

On the Euro front, European Central Bank (ECB) Governing Council member Klaas Knot said on Monday that inflation in the Eurozone is moving towards the ECB’s 2% target, while geopolitical tensions pose minor threats. Nonetheless, the central bank should still exercise caution when cutting interest rates beyond a first step in June. The ECB policymaker Pierre Wunsch stated that the July rate cut is not a done deal and that he still wants monetary policy to remain a little restrictive. 

The ECB Vice President Luis de Guindos emphasized the progress on inflation but pulled back from making any clear projections on the pace of rate cuts. The uncertainties surrounding the ECB’s rate cut timing are likely to drag the Euro (EUR) lower and create a headwind for the EUR/JPY cross. However, the easing fears of geopolitical tensions in the Middle East might boost riskier assets, benefiting the EUR against the JPY.