Euro Gains vs Yen as Eurozone Data Extends Rally

Key Moments

Euro Holds Firm as EUR/JPY Extends Rally

EUR/JPY continued its upward trajectory for a second straight session, trading near 185.30 during European hours on Monday. The cross remained supported as the Euro (EUR) held its ground following the publication of key Eurozone and German economic indicators.

Eurozone Retail Sales and German Factory Orders Support Euro

Fresh figures from the Eurozone showed that Retail Sales rose 1.6% year-over-year in May, in line with expectations and stronger than the previous 1.0% increase. On a monthly basis, Retail Sales expanded 0.2%, slightly below the 0.3% forecast, but reversing from a prior 0.4% decline.

Germany’s Factory Orders also surprised to the upside. Orders climbed 1.9% in May, above estimates of 1.2%. Data for April was revised to a 3.2% decline from an initially reported -3.8%. On an annual basis, Factory Orders surged 6.2%, compared with a previous reading of 2.1%, which was revised higher from 1.6%.

Yen Under Pressure Despite Higher JGB Yields

The EUR/JPY cross advanced as the Japanese Yen (JPY) weakened in what was described as a high-stakes tug-of-war. Even though 10-year Japanese Government Bond (JGB) yields climbed to a new 30-year high of 2.83%, the Yen softened under the strain of rising import costs. This divergence in market dynamics has heightened investor sensitivity to the risk of verbal intervention from Japanese authorities.

Cross-Market Dynamics and USD/JPY Price Action

Market commentary highlighted the broader context for the Yen through moves in USD/JPY. Analyzing recent price action, Teppei Ino of MUFG noted that the USD/JPY pair opened near 161.78 and briefly tested 162.84 before reversing. This reversal was fueled by broad US Dollar (USD) weakness following a soft employment report and comments from Fed Chair Kevin Warsh. However, because the Yen remained relatively weak compared to other G10 currencies amid the Dollar sell-off, the EUR/JPY cross maintained its upward momentum.

Retail Sales Indicator – Definition and Latest Release Details

The Retail Sales data, released by Eurostat on a monthly basis, measures the volume of retail sales in the Eurozone. It shows the performance of the retail sector in the short term, which accounts for around 5% of the total value added of the Eurozone economies. Retail Sales data is widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the YoY reading comparing sales volumes in the reference month with the same month a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.