Key Moments
- EUR/JPY is trading near 185.70 on Monday, moving in a narrow range amid a subdued start to the week.
- Germany’s Producer Price Index increased 1.8% YoY in June, while monthly prices fell 0.3%, a larger drop than markets anticipated.
- A Kyodo report indicated the BoJ is expected to keep its policy rate at 1% next week while maintaining a bias toward further hikes.
Euro-Yen Stalls as Central Bank Meetings Come Into Focus
EUR/JPY is hovering around 185.70 on Monday at the time of writing, with the cross showing limited direction following a calm start to the week. Market participants are hesitant to take strong positions ahead of several central bank meetings, while geopolitical risks in the Middle East and uncertainty around Japanese monetary policy are helping to confine price action.
Eurozone Data and ECB Outlook
On the Eurozone side, fresh figures released Monday showed that Germany’s Producer Price Index rose 1.8% year-on-year in June, easing from a 2.2% increase in May. On a month-on-month basis, producer prices declined 0.3%, a sharper fall than the 0.2% decrease anticipated by markets.
Attention is now shifting toward the European Central Bank policy decision scheduled for Thursday. Market pricing broadly reflects expectations that the ECB will keep interest rates unchanged after delivering a 25-basis-point hike at its previous meeting. Investors are set to scrutinize the monetary policy statement and any remarks from ECB President Christine Lagarde for guidance on the future direction of interest rates.
The Euro remains constrained by rising tensions between Israel and Iran, which are underpinning higher Oil prices and clouding the economic outlook for the Eurozone. Within this context, markets are also expected to look for any signal from Christine Lagarde about the potential for another rate increase at the September meeting.
Japanese Policy Concerns and Intervention Risk
On the Japanese side, traders are alert to the possibility of foreign exchange intervention by authorities. Finance Minister Satsuki Katayama reiterated that the government stands ready to take “decisive action at any time” if needed to address what it views as excessive moves in the Japanese Yen.
According to a Kyodo report, the Bank of Japan is expected to keep its policy rate unchanged at 1% at next week’s meeting. The report also stated that policymakers still see the need for additional rate hikes in the near term and may upgrade their economic growth projections, reinforcing the view that the BoJ is likely to continue its gradual normalization of monetary policy.
Euro Performance Against Major Currencies
The following table summarizes today’s percentage changes of the Euro relative to major currencies. According to the data, the Euro has been strongest versus the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.08% | -0.09% | 0.02% | 0.09% | -0.24% | -0.15% | 0.11% | |
| EUR | -0.08% | -0.15% | -0.06% | -0.01% | -0.31% | -0.25% | 0.03% | |
| GBP | 0.09% | 0.15% | 0.09% | 0.15% | -0.16% | -0.09% | 0.16% | |
| JPY | -0.02% | 0.06% | -0.09% | 0.09% | -0.24% | -0.13% | 0.09% | |
| CAD | -0.09% | 0.00% | -0.15% | -0.09% | -0.31% | -0.21% | 0.00% | |
| AUD | 0.24% | 0.31% | 0.16% | 0.24% | 0.31% | 0.09% | 0.36% | |
| NZD | 0.15% | 0.25% | 0.09% | 0.13% | 0.21% | -0.09% | 0.22% | |
| CHF | -0.11% | -0.03% | -0.16% | -0.09% | -0.00% | -0.36% | -0.22% |
The heat map shows percentage moves of major currencies relative to each other. The base currency is selected from the left-hand column and the quote currency from the top row. For example, choosing the Euro as the base from the left column and moving across to the US Dollar cell gives the percentage change for EUR (base)/USD (quote).
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