EUR/JPY has broken its three-day losing streak and is currently trading around 162.00 during the Asian hours on Wednesday. The uptrend in the EUR/JPY cross can be attributed to the subdued Japanese Yen (JPY) following the release of Trade Balance data on Wednesday.
Japan’s Merchandise Trade Balance fell into a deficit of ¥621.84 billion in July, reversing the previous surplus and missing market estimates. This marks the fifth deficit this year due to imports outpacing exports.
Despite the weak JPY, the possibility of another interest rate hike by the Bank of Japan (BoJ) is looming. Traders are eagerly awaiting BoJ Governor Kazuo Ueda’s upcoming appearance in parliament to discuss the recent interest rate increase decision.
A recent Reuters poll revealed that a majority of economists expect the BoJ to raise interest rates again by year-end. The median forecast for the end-of-year rate increase stands at 0.50%, a 25 basis point hike.
On the Eurozone front, the European Central Bank (ECB) is anticipated to gradually lower interest rates. However, ECB officials are cautious about committing to a specific rate-cut schedule amidst concerns of potential inflationary pressures.
Traders will closely monitor the upcoming Purchasing Managers Index (PMI) data from the Eurozone and Germany scheduled for release. The HCOB Composite PMI for the Eurozone is expected to show a slight decline from the previous reading.
Economic Indicator
Merchandise Trade Balance Total
The Merchandise Trade Balance Total released by the Ministry of Finance is a measure of balance amount between import and export. A positive value shows a trade surplus while a negative value shows a trade deficit. Japan is so much dependant on exports that the Japanese economy heavily relies on a trade surplus. Therefore, any variation in the figures influences the domestic economy. If a steady demand in exchange for Japanese exports is seen, that would turn into a positive.
Last release: Tue Aug 20, 2024 23:50
Frequency: Monthly
Actual: ¥-621.8B
Consensus: ¥-330.7B
Previous: ¥224B
Source: Ministry of Finance of Japan
Analysis:
The EUR/JPY currency pair is experiencing a bullish trend following Japan’s Trade Balance deficit and expectations of a BoJ interest rate hike. This could lead to potential trading opportunities for investors looking to capitalize on the currency market movements. Additionally, the upcoming PMI data releases from the Eurozone and Germany will provide further insights into the economic conditions of these regions, influencing traders’ decisions.