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Market Analysis

EUR/JPY Weakens Near 166.50 Ahead of Eurozone GDP and German CPI Data
Amos Simanungkalit · 21.7K Views

12

 

The EUR/JPY pair remains under pressure around 166.55 during the early European trading hours on Monday. The Japanese Yen (JPY) continues to strengthen as traders increase their expectations for a potential rate hike by the Bank of Japan (BoJ) at its upcoming meeting on Wednesday.

Market participants are eagerly awaiting the BoJ's monetary policy announcement for new market drivers. Speculation about a possible interest rate increase and a substantial reduction in monthly bond purchases is supporting the JPY against the Euro (EUR). Additionally, traders may unwind their carry trades ahead of the BoJ's decision, which could further boost the JPY.

In other news, escalating geopolitical tensions in the Middle East might drive safe-haven flows, benefiting the JPY. The recent attack in the Golan Heights has heightened concerns of a potential conflict between Israel and Hezbollah. Israel has accused Hezbollah of the attack, which killed at least 12 people, including children, and has vowed retaliation. Hezbollah, however, denies involvement, according to the BBC.

Conversely, investors expect the European Central Bank (ECB) to implement rate cuts in the near future, putting downward pressure on the Euro. ECB President Christine Lagarde has indicated that additional data is needed to confirm the ongoing disinflationary trend and strengthen the ECB’s confidence. Key Eurozone economic data this week, including the preliminary GDP figures for Q2 from Germany and the Eurozone, along with the German Consumer Price Index (CPI) for July, may provide insights into future interest rate movements and potentially support the Euro, thereby limiting the downside for the EUR/JPY pair in the short term.

 

 

 

Paraphrasing text from "FX Street" all rights reserved by the original author.

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