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Euro declines as cooling Eurozone inflation, Japan pension reforms lift Yen

  • EUR/JPY falls around 0.35% on Friday, trading near 184.95 at the time of writing.
  • Slowing inflation in Germany and France reinforces expectations that the ECB will keep interest rates unchanged in July.
  • The Japanese Yen gains support after the Japanese government unveiled plans to encourage pension funds to increase domestic investments.

EUR/JPY trades around 184.95 on Friday at the time of writing, down 0.35% on the day, as the Japanese Yen (JPY) benefits from renewed demand following the government's announcement of a potential shift toward greater domestic investment. At the same time, confirmed signs of easing inflation in Germany and France continue to weigh on the Euro (EUR).

Final data released on Friday confirmed that inflationary pressures continue to moderate across the Eurozone. In Germany, the Harmonized Index of Consumer Prices (HICP) rose 2.4% YoY in June, down from 2.7% in May, while monthly prices declined by 0.2%. In France, the Consumer Price Index (CPI) also slowed to 2% YoY from 2.8% in May, with prices falling 0.3% on a monthly basis.

These figures reinforce expectations that the European Central Bank (ECB) will leave interest rates unchanged at its July meeting as policymakers assess developments in energy markets and their impact on the Eurozone economy. However, the immediate impact on the Euro remains limited, as markets had already largely priced in this scenario.

On the Japanese side, the Japanese Yen extends gains against most major peers after Finance Minister Satsuki Katayama said that the government intends to encourage households and the Government Pension Investment Fund (GPIF) to significantly increase their investments in Japanese financial assets. She also stated that the government expects interest rates to rise gradually and wants to accelerate discussions on expanding Japanese government bond products targeted at households.

These developments have boosted expectations of a gradual repatriation of capital toward domestic assets while reinforcing speculation that the Bank of Japan (BoJ) will continue to normalize monetary policy. The announcement also adds to persistent intervention risks in the foreign exchange market, encouraging an aggressive short-covering move in the Japanese Yen.

According to MUFG analyst Derek Halpenny, the announcement came as a surprise and explains the sharp reaction across the Japanese Yen, government bonds and equities. However, he believes these policy changes will take time to produce meaningful effects, adding that confidence in the Bank of Japan remains essential before institutional investors significantly reduce overseas investments in favor of Japanese government bonds.

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.02%-0.02%-0.36%0.00%-0.10%-0.28%-0.00%
EUR-0.02%-0.04%-0.39%-0.01%-0.12%-0.30%-0.02%
GBP0.02%0.04%-0.35%0.02%-0.08%-0.26%0.00%
JPY0.36%0.39%0.35%0.37%0.27%0.06%0.34%
CAD0.00%0.01%-0.02%-0.37%-0.11%-0.30%-0.02%
AUD0.10%0.12%0.08%-0.27%0.11%-0.20%0.06%
NZD0.28%0.30%0.26%-0.06%0.30%0.20%0.27%
CHF0.00%0.02%-0.01%-0.34%0.02%-0.06%-0.27%

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).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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