EUR/JPY surges near 159.00 after BoJ policy decision

EUR/JPY extends its gains on the second successive day, trading higher around 158.90 during the Asian session on Tuesday. Bank of Japan (BoJ) kept its policy rates at -0.1% as widely expected, which contributes to pressure on the Japanese Yen (JPY).

The BoJ also released its quarterly outlook report following the October policy meeting, forecasting a moderate ongoing recovery for Japan's economy. The report suggests that inflation is expected to decelerate initially but could regain momentum as wages increase and inflation expectations rise.

However, the outlook is clouded by significant uncertainty, prompting a need for vigilance regarding financial and foreign exchange market movements and their potential impact on Japan's economy and prices.

Moreover, Japan’s Unemployment Rate for September reduced, as anticipated, to 2.6% from the previous reading of 2.7%. Retail Trade (YoY) for the said month, declined to 5.8% compared to the 5.9% expected and 7.0% previous readings.

The Eurozone revealed a sharp dip in Germany’s inflation, indicating that the recent decision by the European Central Bank (ECB) to hold rates might be the initial pause in a series. The preliminary Harmonized Index of Consumer Prices (MoM) for October declined by 0.2% against the expected growth of 0.1%, swinging from the growth of 0.2% in September. While, the yearly index showed a decline to 3.0% from 4.3% previously, lower than the expected 3.6%.

Additionally, Germany's GDP for Q3 contracted, although the contraction was less severe than anticipated, still showing a negative reading of 0.1% against the market consensus of 0.3% decline.

On Tuesday, investors will likely observe the upcoming reports from Germany on Retail Sales. Eurozone will release the Harmonized Index of Consumer Prices (HICP), Core HICP, and seasonally adjusted Gross Domestic Product (GDP).