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Euro slips as Eurozone inflation cools, yen rises on Japan reform plans
EUR/JPY was around 184.95, while Germany and France both reported softer inflation readings that supported expectations the ECB will keep rates unchanged in July.
The euro fell against the yen after cooling inflation data across the Eurozone, while the yen strengthened on expectations of a policy shift in Japan toward greater domestic investment.
In Germany, inflation measured by the HICP rose 2.4% year over year in June, down from 2.7% in May, and monthly prices fell 0.2%. In France, CPI slowed to 2.0% year over year from 2.8% in May, with prices down 0.3% month over month.
The data reinforced expectations that the European Central Bank will leave interest rates unchanged at its July meeting, with markets already largely pricing that outcome. The immediate move was also described as limited for the euro as investors focus on how energy market developments may affect the region.
On the Japan side, the yen extended gains following comments from Finance Minister Satsuki Katayama indicating the government wants to encourage higher household and Government Pension Investment Fund, or GPIF, investment in Japanese financial assets. The policy direction also supported speculation the Bank of Japan will keep normalizing monetary policy, while MUFG analyst Derek Halpenny said the announcement came as a surprise and may take time to produce meaningful effects.