EUR/JPY Rebounds After Positive Eurozone Data Amid Geopolitical Tensions
The EUR/JPY pair is showing signs of recovery after hitting a six-day losing streak, currently trading around 156.90 in the early European session. The positive momentum came after the release of the Eurozone Producer Price Index (PPI) and German Purchasing Managers’ Index (PMI) data.
Eurozone Composite PMI rose to 50.2 in July, slightly surpassing the expected 50.1 reading. Meanwhile, Germany’s Composite PMI came in at 49.1, higher than both the expected and previous readings. The Services PMI also saw an increase to 52.5, exceeding the anticipated and previous levels.
Traders in Europe are anticipating further rate cuts by the European Central Bank (ECB) in 2024, with the next one likely to happen in September. The weak eurozone economy could push inflation below the ECB’s target of 2%, leading to predictions of two interest rate reductions this year.
On the other hand, the Japanese Yen (JPY) is gaining ground as expectations rise for the Bank of Japan (BoJ) to tighten monetary policy. This could provide ongoing support for the JPY in the near future.
Geopolitical tensions in the Middle East are also influencing market sentiment, with safe-haven flows boosting the JPY. Recent events, such as an Israeli airstrike hitting two schools and warnings of potential attacks by Iran and Hezbollah, are contributing to the cautious atmosphere.
Analysis:
- Positive Eurozone data, including PMI figures, is supporting the EUR/JPY pair’s rebound.
- Expectations of further rate cuts by the ECB are weighing on the Euro’s outlook.
- BoJ’s potential tightening of monetary policy is strengthening the Japanese Yen.
- Geopolitical tensions in the Middle East are driving safe-haven flows towards the JPY.
- Traders should monitor economic data and geopolitical developments for potential impact on the EUR/JPY pair.