EUR/JPY is on a winning streak for the fourth day in a row, trading around 173.30 during the European session on Monday. The Euro has seen upside traction as traders reacted positively to the far-right sweep in the first round of the French snap election on Sunday.
Marine Le Pen’s National Rally emerged as France’s leading political force with the highest turnout in three decades. While the victory was clear for Le Pen’s party, uncertainty looms ahead of the second round of voting on July 7.
The HCOB Eurozone Manufacturing PMI was revised higher to 45.8 in June, although it remains below the survey average of 51.6. Output is contracting at the fastest rate this year, leading ECB Governing Council member Olli Rehn to suggest possible interest rate cuts later in the year.
In Japan, upbeat business confidence data has lifted market sentiment, which could support the Japanese Yen and limit the upside of the EUR/JPY cross. Japan’s Tankan Large Manufacturing Index rose to 13 in the second quarter, marking a two-year high. The Jibun Bank Manufacturing PMI for June also remained expansionary for the second consecutive month.
Speculations about potential intervention by Japanese authorities have also boosted the JPY. Japanese Finance Minister Shunichi Suzuki expressed concerns about rapid and one-sided foreign exchange moves impacting the economy, indicating a readiness to respond appropriately.
Overall, the current risk sentiment in the market plays a significant role in determining the direction of various currencies. In a “risk-on” market, investors are optimistic and willing to take on more risk, while a “risk-off” market sees investors playing it safe with less risky assets. This dynamic influences the performance of currencies like the Australian Dollar, US Dollar, Japanese Yen, and Swiss Franc during different market conditions.