The EUR/JPY currency pair traded around 185.70 on Friday, remaining virtually unchanged for the day as opposing economic data from Japan and the Eurozone offset each other [1]. The Japanese Yen received support from firmer inflation data, with Japan's core Consumer Price Index (CPI), excluding fresh food, rising 1.8% year-over-year in July, up from 1.6% in June. This marks the fastest pace of growth since January and signals persistent inflationary pressures, reinforcing expectations that the Bank of Japan (BoJ) may continue normalizing its monetary policy [1]. The prospect of higher interest rates in Japan supported the Yen and limited the upside in EUR/JPY.
Conversely, the Euro remained resilient due to better-than-expected economic activity indicators in the Eurozone. The preliminary HCOB Manufacturing Purchasing Managers Index (PMI) for the Eurozone rose to 52.8 in August from 51.9 previously, surpassing expectations of 51.8. The Services PMI held steady at 51.7, slightly above the forecast of 51.5, while the Composite PMI improved to 52.1 from 52, exceeding the consensus of 51.7 [1].
German data presented a mixed outlook. The country's Manufacturing PMI surged to 54.1 in August, its highest in 51 months, from 52.2 previously and above the expected 52. However, the Services PMI declined to 48.5 from 49.8, missing expectations for a return to expansion at 50.1. As a result, Germany's Composite PMI eased to 51 from 51.3, below the expected 51.3 [1].
Overall, EUR/JPY remained balanced as market participants weighed the likelihood of further monetary policy normalization in Japan against positive surprises in European manufacturing activity. The Euro was the strongest against the Swiss Franc among major currencies, gaining 0.11% against CHF, while it was slightly weaker against the US Dollar and Japanese Yen, down 0.04% and 0.06% respectively [1].
CONCLUSION
The EUR/JPY pair remained stable as stronger Japanese inflation data and upbeat Eurozone PMIs offset each other. Market participants are closely watching for further signals from the Bank of Japan and European economic indicators, with the currency pair likely to remain sensitive to future data releases and central bank actions.