EUR/JPY is showing strength in Wednesday’s European session, trading around 173.80 and up 0.20% for the day. The Japanese Yen is under pressure as Japanese business activity turned negative in June. This has caused the Yen to weaken, while the possibility of intervention by the Bank of Japan could provide some support in the short term.
On the other hand, the Eurozone’s inflation rate eased slightly in June but is unlikely to prompt the European Central Bank (ECB) to cut interest rates at its upcoming meeting. ECB President Christine Lagarde recently stated that further rate cuts are not urgent, highlighting the divergence in monetary policy between the Eurozone and Japan as a supportive factor for the Euro.
The Japanese Yen is influenced by various factors such as the performance of the Japanese economy, the Bank of Japan’s policies, and risk sentiment among traders. The BoJ’s ultra-loose monetary policy has led to a widening policy gap with other central banks, particularly the US Federal Reserve, which favors the US Dollar against the Yen. Additionally, the Yen is often considered a safe-haven investment during times of market turmoil, leading to its appreciation against riskier currencies.