- EUR/JPY falls after the release of lower-than-expected Eurozone inflation data.
- Cooling inflation suggests the ECB will be more likely to cut interest rates, leading to outflows for the Euro.
- The Japanese Yen weakens itself after a fake rally following Ishiba’s victory as he adopts an accommodative stance.
EUR/JPY trades just over a third of a percent lower on Tuesday, in the 159.30s. The pair declines after the release of Eurozone inflation data shows lower-than-expected inflation in the bloc, which suggests the European Central Bank (ECB) will be more likely to cut interest rates in future meetings. This, in turn, is likely to lead to outflows of capital and a weaker Euro.
The Eurozone Harmonized Index of Consumer Prices (HICP) came out at 1.8% in September from 2.2% previously and 1.9% forecast, according to Eurostat. Core HICP fell to 2.7% from 2.8% previously and the same expected. The data backs up comments from the ECB President Christine Lagarde who hinted that inflation was falling back to the central bank’s 2.0% target, as expected. "The latest developments strengthen our confidence that inflation will return to target in a timely manner," she said on Monday.
EUR/JPY had been rising at the start of the week after Japan’s incoming Prime Minister, Shigeru Ishiba wrong-footed markets which had expected him to take a neutral approach. The Yen rallied after the news of Ishiba’s victory over rival Sanae Takaichi due to Takaichi’s explicit favoring of a weak Yen to help Japanese exporters. However, on Monday Ishiba said that monetary policy ought to be kept accommodative (interest rates low) because the economic conditions didn’t warrant higher rates. His comments took investors by surprise and gave EUR/JPY a lift.
The Japanese Jibun Manufacturing Purchasing Manager Index (PMI) showed a slight rise in manufacturing activity, pushing up to 49.7 in September according to data released on Tuesday during the Asian session, which was higher than the 49.6 in the previous month, and expectations of the same. The data, though still in contraction territory, may have further put pressure on EUR/JPY.
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
EUR/USD stays weak below 1.0950 ahead of Fedspeak
EUR/USD stays defensive and edges lower toward 1.0900 on Monday. Broad risk aversion, amid the escalating geopolitical tensions in the Middle East and conflicts between China and Taiwan, underpin the safe-haven US Dollar as markets await Fedspeak.
GBP/USD retreats to 1.3050 area as markets turn cautious
GBP/USD trades modestly lower on the day near 1.3050, struggling to build on Friday's modest gains. Sustained US Dollar strength, due to looming geopolitical risks worldwide and China's economic concerns, doesn't allow the pair to gain traction.
Gold struggles to extend recovery, holds above $2,650
After gaining more than 1% on Friday, Gold finds it difficult to preserve its bullish momentum on Monday. Although escalating geopolitical tensions help XAU/USD limit its losses, the broad-based USD strength continues to cap the upside.
Five Fundamentals for the week: Explosive Middle East, ECB decision and US Retail Sales stand out Premium
Even on a bank holiday, markets are on the move. Concerns about Chinese stimulus and the Middle East stir markets, but the calendar offers several important events with the potential to shake things up. Here are five fundamentals for the week starting on October 14.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.