The EUR/JPY exchange rate is experiencing a downturn as the Japanese Yen strengthens following the release of key Tokyo Consumer Price Index (CPI) data for November. This data revealed a significant rise in core inflation, which increased by 2.2% year-over-year, surpassing the anticipated increase of 2.1%, marking the highest inflation rate seen in three months. In contrast, the Eurozone is also facing inflation pressures, with expectations for the Core Harmonized Index of Consumer Prices (HICP) to rise by 2.8% year-over-year in November, up from 2.7% in October.
During Friday’s Asian trading session, the EUR/JPY pair hovered around 158.80 as market sentiment shifted in favor of the Yen. November’s Tokyo CPI data showed a year-on-year increase of 2.6%, a notable rise from 1.8% reported in October. The CPI excluding fresh food and energy recorded a 2.2% increase, up from 1.8%, exceeding market consensus and reinforcing views that inflationary trends are strengthening in Japan.
This data serves as a vital indicator of national price trends in Japan, with core inflation consistently staying above the Bank of Japan’s (BoJ) target of 2%. This ongoing inflation could prompt the BoJ to consider further interest rate hikes if the trend continues. The central bank has previously indicated that it would be prepared to respond to persistent inflation factors that justify an increase in rates.
Meanwhile, the European Central Bank (ECB) is grappling with the challenges posed by slowing economic growth within the Eurozone, leading to speculation about potential rate cuts in December. However, market opinions remain mixed concerning the magnitude of any possible cut. The impending release of the Eurozone’s HICP figures will be closely scrutinized by traders, as officials navigate the complexities of managing inflation while attempting to stabilize economic growth.
