EUR/JPY RISES AFTER EUROZONE INFLATION DATA LANDS AS FORECAST

EUR/JPY is recovering after several days of weakness after Eurozone inflation comes out as expected. 

It had been speculated the result would fall below expectations because of weaker-than-forecast German and Spanish inflation on Thursday. 

Japanese data showed an uptick in inflation in Tokyo which suggests the BoJ could raise rates, supporting JPY.  

EUR/JPY is trading a quarter of a percent higher at just above 161.00 on Friday, after the release of Eurozone inflation data for July met economists’ expectations. 

Lower-than-expected German and Spanish inflation released prior to the region-wide figure, on Thursday, had set the scene for a similar below-expectations fall in Eurozone-wide inflation. However, this was not in the end the case, and the Euro rebounded on the news. 

The annual Consumer Price Index (CPI) in the Eurozone rose 2.2% in August in line with estimates, and was lower than the 2.6% rise reported in July. Although this marked the lowest increase in Eurozone consumer prices since July of 2021 and contrasted with the rest of the year – in which inflation hovered between 2.4% - 2.6% – that it was in line with estimates was supportive for the Euro and EUR/JPY. 

The data is unlikely to change the European Central Bank’s (ECB) gradual and cautious, data-dependent stance on reducing interest rates, according to Nordea Bank. That the ECB will probably not be cutting interest rates aggressively is propping up the Euro, since higher-for-longer interest rates attract greater inflows of foreign capital.