- EUR/JPY trades firmer around 160.75 in Friday’s early European session.
- German HICP inflation rose in July to 2.6%, according to the Federal Statistics Office on Friday.
- Traders will evaluate Japan's monetary policy outlook about the interest rate path.
The EUR/JPY cross holds positive ground near 160.75 during the early European session on Friday. The recent German inflation report provides modest support to the Euro (EUR). However, safe-haven flows amid ongoing geopolitical tensions in the Middle East might lift the Japanese Yen (JPY) and cap the upside for the cross.
The German Harmonized Index of Consumer Prices (HICP) rose 2.6% year-on-year in July, Destatis reported on Friday. This figure was in line with the market expectation. Meanwhile, the HICP inflation remains unchanged at 0.5% MoM in July.
The European Central Bank (ECB) cut the interest rates from 4% to 3.75%, but there is still no firm path for easing policy further. ECB President Christine Lagarde said during the coast conference the question of any move in September is wide open.
On the other hand, the dovish comments from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida on Wednesday weigh on the JPY. According to the JP Morgan Asset Management (JPAM), the Bank of Japan is unlikely to hike in the near term. Analysts said that the BoJ is more likely to occur in 2025 if the global economic environment continues steady. Additionally, Japan’s Finance Minister Shunichi Suzuki stated on Thursday that monetary policy decisions fall under the purview of the Bank of Japan, while they will continue watching market developments closely, as reported by Reuters.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Further weakness remains in the pipeline
AUD/USD resumed its decline and slipped back to the 0.6360-0.6350 band, or monthly troughs, on the back of the strong resumption of the bid bias around the Greenback, which was reignited following the US-China trade talks over the weekend.
EUR/USD: A drop to 1.1000 in the offing?
EUR/USD accelerated its monthly retracement on Monday, retreating to multi-week lows in the vicinity of 1.1060 following the generalised recovery in the US Dollar, all in response to the auspicious outcome from the US-China talks in Geneva on Saturday.
Gold: Gains appear limited near $3,250
Gold began the week under pressure, retreating toward the $3,200 mark per troy ounce, where some support appeared to materialise. The decline followed a broader improvement in risk sentiment after encouraging developments emerged from US-China trade talks over the weekend.
Bitcoin ETFs net $867 million as Strategy scoops up additional $1.3 billion worth of BTC
Bitcoin (BTC) briefly crossed $105,450 before declining to $101,400 on Monday as CoinShares' report revealed that Bitcoin exchange-traded funds (ETFs) recorded $867 million in net inflows last week.
Memecoins on the move: WIF, BOME, and FLOKI post double-digit gains as US-China agree on tariff reduction
Dogwifhat, Book of Meme, and FLOKI extend their double-digit rallies on Monday, adding to last week’s surge. The rally is driven by growing risk-on sentiment in crypto markets after the US and China agreed to major tariff reductions.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.