EUR/JPY consolidates the recent gains after Eurozone inflation data, hovers around 159.20
- EUR/JPY struggles to find a direction after a choppy session.
- The Euro faced a challenge of the possibility of the ECB rate cut in June.
- Middle East tension might have driven the foreign investments towards the safe-haven JPY.
EUR/JPY experiences difficulty in establishing a clear direction after a choppy previous day, hovering around 159.20 during the Asian session on Friday. The Euro (EUR) gained upward support following the release of mixed Eurozone inflation data on Thursday, consequently providing a foundation for the EUR/JPY cross.
In January, the Eurozone preliminary Core Harmonized Index of Consumer Prices (YoY) registered an increase of 3.3%, surpassing the expected 3.2% growth but slightly lower than the prior 3.4%. The annual Consumer Price Index met expectations at 2.8%, consistent with the previous reading of 2.9%. However, the month-over-month report indicated a decline of 0.4%, contrasting with the 0.2% rise observed in December.
However, the Euro faced a challenge due to the heightened market expectations of an interest rate cut by the European Central Bank (ECB) in June, which could be attributed to the softer preliminary Consumer Price Index (CPI) data from Germany. This, in turn, might have capped the advance of the EUR/JPY cross.
Moreover, ECB member Mario Centeno has suggested that if inflation continues on its current trajectory in the coming months, the ECB's next probable action would be to cut rates. If such a move materializes, it could signal the beginning of a cycle aimed at the normalization of interest rates.
The Bank of Japan's (BoJ) hawkish stance has bolstered the Japanese Yen (JPY), finding support amid geopolitical tensions in the Middle East. Escalated tensions have prompted investors to seek the safe-haven qualities of the JPY.
For the week ending January 26, Foreign Bond Investment in Japan recorded inflows of ¥382.9 billion, a notable increase from the previous week's outflows of ¥-43.5 billion. Additionally, Foreign Investment in Japanese Stocks rebounded during the same week, rising to ¥720.3 billion compared to the previous week's ¥287 billion.