The EUR/JPY exchange rate is displaying upward momentum, reaching approximately 160.70 in the early hours of Tuesday’s European session, representing a 0.49% increase on the day. This rise is primarily influenced by comments from Shigeru Ishiba, the newly appointed Prime Minister of Japan, which have negatively impacted the Japanese Yen (JPY). Market participants are now looking ahead to the Eurozone’s Harmonized Index of Consumer Prices (HICP) for September, seeking further direction. In addition, speeches by European Central Bank (ECB) officials Luis de Guindos and Isabel Schnabel are anticipated to provide further insights into the bank’s policy stance.
Ishiba’s recent dovish remarks emphasize the necessity for the Bank of Japan (BoJ) to maintain an accommodating monetary policy, aimed at supporting the country’s fragile economic recovery. This sentiment has contributed to increased selling pressure on the Yen.
On the Japanese economic front, the Tankan Large Manufacturing Index revealed stable business conditions for large manufacturers in the third quarter of 2024. The large Manufacturers’ Sentiment Index held steady at 13.0, matching the figure from the previous quarter, which aligns with market expectations.
Turning to the Eurozone, recent data showing softer consumer price index readings from Germany has led to speculation regarding a potential 25 basis point rate cut at the upcoming ECB meeting scheduled for October. This development may place a lid on any further appreciation of the EURO . In a recent statement, ECB President Christine Lagarde expressed growing confidence that inflation is on track to meet the central bank’s target of 2%. Such comments have fueled expectations for a shift in monetary policy, with increasing market anticipation surrounding a reduction in borrowing costs at the October meeting.
