Germany's unexpected inflation boosted the euro, with EUR/JPY rising for three consecutive days to 172.20. The yen's gains were limited by expectations of interest rate hikes.
2025-09-01 15:11:40
The EUR/JPY pair continued its upward trend during Monday's Asian session, reaching 172.20, marking its third consecutive day of gains. The main impetus came from German inflation data, which showed that the inflation rate rose to 2.2% in August from 2% in July, exceeding market expectations of 2.1%. While still close to the ECB's 2% target, it provided support for the euro.
Olli Rehn, a member of the European Central Bank's governing council, said the current uncertainty surrounding inflation trends requires policy flexibility. He added: "A stronger euro, lower energy prices and easing core inflation, as well as the impact on the global economy from trade concerns, could all pose downside risks to inflation."
The market generally expects the ECB to keep interest rates unchanged at 2% at its September meeting, but still emphasizes "meeting-by-meeting decision-making."
As for the yen, the market expects the Bank of Japan to raise interest rates this year, mainly based on wage growth, continued inflationary pressure and optimism about the economic outlook.
The latest data showed that Japan's capital expenditure grew by 7.6% year-on-year in the second quarter, exceeding expectations and the previous reading. However, the manufacturing PMI remained at 49.7, indicating that the manufacturing sector is still in contractionary territory. Fundamental support has provided support for the yen, limiting further upside for the EUR/JPY.
From a technical perspective, the EUR/JPY pair is bullish in the short term. A break above the 172.50 resistance level could push it towards the 173 level. However, if the yen strengthens on expectations of rate hikes, the exchange rate could retest support around 171.50. Overall, the market remains constrained by the intertwined influence of euro inflation and yen policy expectations.
Editor's opinion:
The current rise in the EUR/JPY is largely driven by unexpectedly positive German inflation data, but the yen's fundamental strength is gradually building. With expectations of a Bank of Japan rate hike growing this year, the exchange rate may face some downward pressure from its highs.
The market will pay close attention to the ECB's policy stance and Japan's economic data, which will determine whether EUR/JPY can steadily break through the 173 mark or fall back to the 171 range and fluctuate.
Olli Rehn, a member of the European Central Bank's governing council, said the current uncertainty surrounding inflation trends requires policy flexibility. He added: "A stronger euro, lower energy prices and easing core inflation, as well as the impact on the global economy from trade concerns, could all pose downside risks to inflation."
The market generally expects the ECB to keep interest rates unchanged at 2% at its September meeting, but still emphasizes "meeting-by-meeting decision-making."
As for the yen, the market expects the Bank of Japan to raise interest rates this year, mainly based on wage growth, continued inflationary pressure and optimism about the economic outlook.
The latest data showed that Japan's capital expenditure grew by 7.6% year-on-year in the second quarter, exceeding expectations and the previous reading. However, the manufacturing PMI remained at 49.7, indicating that the manufacturing sector is still in contractionary territory. Fundamental support has provided support for the yen, limiting further upside for the EUR/JPY.
From a technical perspective, the EUR/JPY pair is bullish in the short term. A break above the 172.50 resistance level could push it towards the 173 level. However, if the yen strengthens on expectations of rate hikes, the exchange rate could retest support around 171.50. Overall, the market remains constrained by the intertwined influence of euro inflation and yen policy expectations.
Editor's opinion:
The current rise in the EUR/JPY is largely driven by unexpectedly positive German inflation data, but the yen's fundamental strength is gradually building. With expectations of a Bank of Japan rate hike growing this year, the exchange rate may face some downward pressure from its highs.
The market will pay close attention to the ECB's policy stance and Japan's economic data, which will determine whether EUR/JPY can steadily break through the 173 mark or fall back to the 171 range and fluctuate.
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