EUR/JPY Outlook:
The EUR/JPY outlook is slightly weaker, but likely to move sideways, as it currently trades just below its 90-day average and is within a stable 3-month range. The balance of latest economic data presents mixed signals.
Key drivers:
- Rate gap: The European Central Bank's cautious approach to interest rate adjustments contrasts with the Bank of Japan's recent hike, boosting the EUR against the JPY.
- Risk/commodities: The surge in oil prices has raised Japan's import costs, negatively affecting the yen’s value, while impacting the euro through inflation dynamics.
- One macro factor: Germany's IFO business climate index release might reveal improved economic morale, potentially boosting the euro if results are favorable.
Range:
EUR/JPY is likely to hold its position within its recent stable range.
What could change it:
- Upside risk: A substantial improvement in Germany's economic indicators could strengthen the euro.
- Downside risk: Continued inflation concerns in Japan, leading to further aggressive monetary policies, could weaken the euro against the yen.