EUR/JPY surrenders half of intraday gains after steady Eurozone flash PMI
- EUR/JPY surrenders some of its intraday gains and drops to near 157.50 after the release of the flash Eurozone, Germany and France PMI data for January.
- The Eurozone Composite PMI remained steady at 50.2, lower than expectations of 50.4.
- The Japanese Yen underperforms amid a decline in demand for safe-haven assets.
The EUR/JPY pair gives up half of its intraday gains and falls to near 157.50 from the intraday high of 158.23 in European trading hours on Friday. The asset faces selling pressure after the release of the preliminary HCOB Purchasing Managers’ Index (PMI) data of the Eurozone and its major nations Germany and France.
The PMIs report showed that the French Composite PMI contracted for the straight sixth month in February. While the overall business activity expanded at a faster-than-expected pace in Germany, which offered relief to the whole continent.
The Eurozone Composite PMI came in at 50.2, similar to its prior release but lower than estimates of 50.4. Activities in the manufacturing sector contracted but at a slower pace. However, the service sector activity expanded but at a slower pace.
Earlier in the day, the Euro (EUR) was underperforming its risky peers in a risk-on market mood. The outlook of the Euro has already been vulnerable as traders have fully priced in three more interest rate cuts by the European Central Bank (ECB) this year. ECB dovish bets are based on increasing confidence that the Eurozone inflation will sustainably return to the 2% target this year.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.31% | 0.21% | 0.51% | 0.16% | 0.30% | 0.16% | 0.11% | |
| EUR | -0.31% | -0.11% | 0.19% | -0.16% | -0.02% | -0.16% | -0.20% | |
| GBP | -0.21% | 0.11% | 0.32% | -0.05% | 0.09% | -0.05% | -0.10% | |
| JPY | -0.51% | -0.19% | -0.32% | -0.32% | -0.20% | -0.35% | -0.39% | |
| CAD | -0.16% | 0.16% | 0.05% | 0.32% | 0.13% | 0.00% | -0.05% | |
| AUD | -0.30% | 0.02% | -0.09% | 0.20% | -0.13% | -0.13% | -0.19% | |
| NZD | -0.16% | 0.16% | 0.05% | 0.35% | -0.00% | 0.13% | -0.05% | |
| CHF | -0.11% | 0.20% | 0.10% | 0.39% | 0.05% | 0.19% | 0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
ECB officials have also been worried about deepening risks of inflation undershooting the central bank’s target of 2%. Growing risks to inflation remaining persistently lower have been stemmed from weak economic outlook, partly by slowdown in domestic consumption and fears of potential tariffs from the United States (US).
Meanwhile, the Japanese Yen (JPY) weakens across the board as its safe-haven appeal has diminished. However, its outlook has strengthened as hotter-than-expected National Consumer Price Index (CPI) data for January has increased market expectations that the Bank of Japan (BoJ) will raise interest rates again this year. Japan’s headline CPI came in at 4%, higher than 3.6% reading in December. This is the highest reading seen since January 2023. National CPI excluding Fresh Food, which is closely tracked by BoJ officials, rose at a faster-than-expected pace of 3.2%.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
