EUR/JPY hits fresh 11-month peak amid mixed Eurozone data and soft Yen

• EUR/JPY extends winning streak, touches highest level since July 2024.
• Eurozone PMI data indicate a fragile but stable recovery, with services rebounding slightly and manufacturing remaining weak.
• ECB’s Lagarde calls for faster rollout of digital euro; Nagel signals bond-buying only for emergencies.

The Euro (EUR) advances against the Japanese Yen (JPY) for a third consecutive day on Monday, hitting its highest level in nearly eleven months, as steady Euro demand and a persistently weak Yen fuel fresh buying. Traders are betting that the European Central Bank (ECB) will be cautious about easing rates too quickly, while the Bank of Japan's (BoJ) gradual approach to tightening leaves the Yen vulnerable, keeping EUR/JPY on a firm upward path.

The EUR/JPY cross is edging higher, trading just shy of the intraday peak of 169.72. At the time of writing, the pair is hovering near 169.21, up roughly 0.53% on the day, with technical momentum staying supportive for further gains.

Fresh data on Monday showed the Eurozone economy remains on a fragile recovery path. The HCOB Eurozone Composite Purchasing Managers Index (PMI) held steady at 50.2 in June, slightly missing forecasts of 50.5. The services sector showed a mild improvement, with the Services PMI rising to 50.0 from 49.7, indicating a stabilization in activity after recent softness. However, manufacturing continues to struggle, with the Manufacturing PMI unchanged at 49.4, undershooting expectations of 49.8 and signaling a persistent drag on the region’s growth outlook.

Meanwhile, Japan’s latest numbers offered a brighter tone. The au Jibun Bank Japan Composite PMI rose to 51.4 in June from 50.2 previously, while the Manufacturing PMI climbed back into expansion territory at 50.4 — the first positive reading for the sector in over a year and beating market forecasts. The Services PMI also edged up to 51.5 from 51.0, indicating steady growth in the services sector of the economy.

Adding to the Euro’s support, ECB President Christine Lagarde on Monday urged EU lawmakers to push ahead with legislation for a digital euro, calling it vital for Europe’s financial sovereignty. Separately, Bundesbank President Joachim Nagel emphasized that large-scale bond buying should be reserved for rare emergencies, underlining that interest rates will remain the primary policy tool. This reinforces the view that the ECB will avoid excessive stimulus, keeping the Euro well bid against the Yen.

On the other hand, the Bank of Japan kept its key rate unchanged last week and outlined a gradual plan to taper its bond purchases over the next two years. Governor Ueda reiterated that any further tightening will depend on inflation sustainably hitting target levels, signaling that policy will remain relatively accommodative compared to other major central banks. This policy gap continues to weigh on the Yen and keeps EUR/JPY biased to the upside.