Euro Slides vs Yen as German PMI, Firm Japan Inflation

Key Moments

EUR/JPY Under Pressure Following German PMI Data

EUR/JPY continued to move lower for a second consecutive day, trading near 184.30 during European hours on Tuesday. The cross weakened after the release of the latest HCOB Purchasing Managers Index figures from Germany, with market focus shifting to upcoming Eurozone PMI data scheduled for later in the day.

Germany’s preliminary HCOB Manufacturing PMI for June came in at 50.0, exactly in line with forecasts and unchanged from the neutral threshold separating expansion from contraction. The reading followed a 50.1 print in May, indicating that the sector remains stuck on the borderline between growth and decline.

The services sector painted a weaker picture. The Services PMI fell to 46.8 in June from 48.1 in May, missing the consensus estimate of 48.7. The Composite PMI, which aggregates manufacturing and services activity, dropped to 48.0, down from the prior 48.8 and below expectations for 49.9, signaling a more pronounced contraction in overall private-sector activity.

Yen Supported by Intervention Risks and Inflation Backdrop

Upside for EUR/JPY appears constrained as the Japanese Yen holds firm, supported by persistent concerns that Japanese authorities may step into the foreign exchange market.

On Monday, Finance Minister Satsuki Katayama said that officials are prepared to respond appropriately to currency fluctuations at any time. Those remarks were reinforced on Tuesday when Chief Cabinet Secretary Minoru Kihara reiterated that the government will take decisive action against volatile foreign exchange moves if necessary.

Recent inflation data added another layer of support to the Yen. Fresh figures from the Bank of Japan on Tuesday indicated that underlying price pressures remain elevated. The BoJ’s new core consumer inflation measure rose 2.7% in May, while the core-core CPI increased 2.1%. Both measures eased slightly from April readings of 2.8% and 2.2%, but they stayed above the central bank’s 2% target, maintaining pressure on policymakers.

German Manufacturing PMI: Indicator Overview

The Manufacturing Purchasing Managers Index (PMI) for Germany is released monthly by S&P Global and Hamburg Commercial Bank (HCOB). It serves as a leading gauge of business conditions in Germany’s manufacturing sector, based on surveys of senior executives at private-sector firms.

Survey respondents report changes compared to the previous month, providing early signals on trends that may later appear in official data such as Gross Domestic Product, industrial production, employment, and inflation. As a key manufacturing center in Europe, Germany’s PMI is often viewed as a broader barometer of manufacturing health across the continent.

The index ranges from 0 to 100. A level of 50.0 indicates no change from the prior month. Readings above 50 typically point to an expanding manufacturing economy and are generally considered supportive for the Euro. Values below 50 suggest a contraction in manufacturing activity, a development usually perceived as negative for the Euro.

Latest German Manufacturing PMI Release