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EUR/JPY holds near 185.70 as Japan inflation offsets Euro strength
Japanese core CPI rose to 1.8% year over year in July and the eurozone manufacturing PMI jumped to 52.8 in August, leaving the pair broadly balanced around 185.7.
EUR/JPY was trading around 185.70 on Friday, virtually unchanged on the day, as gains in the Japanese yen were offset by resilience in the euro, according to FXStreet.
On the Japan side, core CPI excluding fresh food rose 1.8% year over year in July, up from 1.6% in June and the fastest pace since January, reinforcing expectations that the Bank of Japan could continue normalizing monetary policy. Firmer underlying inflation could give the BoJ more room to raise interest rates, a setup that supports the yen and caps upside for EUR/JPY.
In the eurozone, preliminary activity indicators provided support for the euro. The HCOB Manufacturing PMI rose to 52.8 in August from 51.9, beating expectations of 51.8, while the Services PMI held at 51.7, slightly above the 51.5 forecast, and the Composite PMI improved to 52.1 from 52, above the 51.7 consensus.
Germany showed a split picture within the data, with Manufacturing PMI jumping to 54.1 in August from 52.2 and hitting the highest level in 51 months, but Services PMI falling to 48.5 from 49.8. With yen supported by inflation and the euro propped up by manufacturing strength, EUR/JPY remained broadly balanced around 185.70.