Key Moments
- EUR/JPY trades near 185.85 on Thursday, up 0.12%, as markets position for an ECB rate hike in June.
- Eurozone data show firmer PMIs and persistent PPI inflation alongside a 0.4% MoM drop in April Retail Sales.
- Expectations for further BoJ tightening and potential FX intervention continue to restrain EUR/JPY upside.
Euro Supported by ECB Tightening Expectations
EUR/JPY is trading around 185.85 on Thursday at the time of writing, registering a 0.12% gain on the day. The cross is underpinned by the Euro (EUR) as market participants anticipate that the European Central Bank (ECB) will implement another interest rate increase at its June policy meeting.
Recent Eurozone indicators offer a mixed assessment of the region’s momentum. Services and Composite Purchasing Managers Index (PMI) readings for May were revised higher on Wednesday, although both remain in contraction territory. At the same time, April’s Producer Price Index (PPI) pointed to ongoing inflation pressures, reinforcing investor expectations that the ECB could extend its tightening cycle beyond the anticipated June hike.
Mixed Eurozone Data as Retail Sales Weaken
Fresh figures released on Thursday highlight softer consumer spending. Eurozone Retail Sales declined by 0.4% month-on-month in April, following a revised 0.8% increase in the prior month and compared with consensus expectations for a 0.3% drop. On a year-on-year basis, Retail Sales growth slowed to 1% from a previous 2.1%.
Despite the uneven data backdrop, markets continue to price in a 25-basis-point increase at the next ECB meeting. A Reuters poll of economists indicated that the ECB is expected to lift its deposit rate to 2.25% in June, with another rise seen as likely in September. However, analysts at BNY caution that a more hawkish ECB stance may not automatically result in lasting strength for the Euro.
BoJ Normalization and Intervention Risk Temper EUR/JPY Rally
On the Japanese side, the Yen (JPY) remains underpinned by expectations that the Bank of Japan (BoJ) will proceed with normalizing monetary policy. BoJ Governor Kazuo Ueda stated on Wednesday that the central bank’s basic stance remains to continue raising interest rates in line with economic, inflation, and financial developments.
At the same time, intervention risk is in focus. Japan’s Finance Minister Satsuki Katayama reiterated that authorities stand ready to intervene in the foreign exchange market if necessary. This combination of prospective BoJ tightening and the possibility of official action in FX markets continues to cap the upside in EUR/JPY, even as sentiment toward the Euro has improved. Investors remain wary of potential intervention should Yen weakness deepen further.
Euro Performance Against Major Currencies
The table below summarizes the Euro’s percentage moves against major currencies today, indicating that the Euro has shown particular strength versus the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.26% | -0.15% | -0.14% | 0.03% | -0.09% | -0.18% | -0.31% | |
| EUR | 0.26% | 0.09% | 0.13% | 0.28% | 0.15% | -0.02% | -0.05% | |
| GBP | 0.15% | -0.09% | 0.02% | 0.19% | 0.06% | -0.11% | -0.16% | |
| JPY | 0.14% | -0.13% | -0.02% | 0.16% | 0.04% | -0.14% | -0.17% | |
| CAD | -0.03% | -0.28% | -0.19% | -0.16% | -0.12% | -0.30% | -0.35% | |
| AUD | 0.09% | -0.15% | -0.06% | -0.04% | 0.12% | -0.16% | -0.19% | |
| NZD | 0.18% | 0.02% | 0.11% | 0.14% | 0.30% | 0.16% | -0.05% | |
| CHF | 0.31% | 0.05% | 0.16% | 0.17% | 0.35% | 0.19% | 0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is taken from the left column, while the quote currency is taken from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
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