The EUR/JPY pair retraces its recent gains, slipping to around 162.70 during Friday’s Asian session as the Japanese Yen (JPY) strengthens following the release of Tokyo’s Consumer Price Index (CPI) data.
Japanese Yen Strengthens on Inflation Data
Tokyo’s core CPI rose 2.4% year-on-year in March, up from 2.2% in February, aligning with market expectations. This marks the fifth consecutive month that inflation has exceeded the Bank of Japan’s (BoJ) 2% target, reinforcing speculation that the central bank may continue tightening its monetary policy. The headline CPI remained steady at 2.9% YoY, while Tokyo’s inflation measure, excluding fresh food and energy, climbed to 1.1% from 0.8% in February.
The BoJ’s March meeting summary reaffirmed its readiness to raise interest rates further if economic conditions justify such a move. The central bank reiterated a flexible, data-driven approach, considering evolving economic trends and inflation risks.
Euro Weakens Amid Escalating Trade Tensions
The Euro (EUR) faces pressure amid escalating trade tensions between the United States and the Eurozone. The European Union (EU) is preparing retaliatory tariffs in response to US President Donald Trump’s 25% tariff on auto imports, set to take effect on April 2.
Germany, a major auto exporter, is expected to be among the hardest hit, with 13% of its total auto exports destined for the US. Trump has warned of additional tariffs on the EU and Canada if they retaliate, fueling concerns of a potential trade war that could further weaken the Euro.
Market Outlook
With growing speculation about BoJ rate hikes and trade tensions weighing on the Euro, EUR/JPY may remain under pressure. Investors will closely monitor global trade developments and further policy signals from the BoJ for future direction.
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