EUR/JPY at 168.85 Due to European Instability

EUR/JPY at 168.85 Due to European Instability

Key Points:

  • EUR/JPY at 168.85: Influenced by French political instability, ECB actions, and Japanese economic data.
  • Political Instability in France: Macron’s snap elections have eroded confidence in the Euro, impacting EUR/JPY.
  • ECB’s Rate Cut: A 25 basis points cut highlights growth concerns, contributing to the Euro’s decline.

As the early European session unfolds on Monday, the EUR/JPY cross rate is 168.85. This dynamic pairing is currently influenced by political instability in France, actions taken by the European Central Bank (ECB), and economic data from Japan. Therefore, these factors collectively create a volatile environment for the currency pair.

Euro Drops Amid Macron’s Parliament Dissolution

The Euro faces significant pressure due to the political upheaval in France. President Emmanuel Macron’s decision to dissolve the parliament and announce snap elections has created uncertainty. The Renaissance party’s defeat by far-right opposition has further complicated the scenario, leading to a lack of confidence in the Euro. According to CNN, this political instability has attracted sellers to the Euro, posing a substantial headwind for the EUR/JPY pair.

ECB’s 25bps Rate Cut Impacts EUR/JPY Pair

The European Central Bank (ECB) implemented a 25 basis points interest rate cut in June. The ECB’s statement highlighted their commitment to a “data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction.” The ECB’s cautious stance shows its flexibility in response to changing economic conditions. However, the rate cut highlights ongoing concerns about economic growth in the Eurozone. This policy decision has contributed to the Euro’s decline, exacerbating the downward pressure on EUR/JPY.

Yen Stability Challenged by Q1 GDP at -1.8% Annualised.

Japan’s economic data presents a mixed picture, impacting the Yen’s performance. The first quarter Gross Domestic Product (GDP) remained unchanged at -0.5% on a quarter-on-quarter basis, aligning with previous readings and consensus expectations. Similarly, the annualised GDP for Q1 slightly improved to -1.8% from the previous -2.0%. However, it still fell slightly below the consensus of -1.9%. These figures suggest a sluggish economic environment, which provides limited support for the Yen in the current market.

BoJ’s Policy Meeting: 10-Year JGB Yield at 1.029%

The Bank of Japan (BoJ) will hold a monetary policy meeting on Friday, expecting interest rates to remain steady. The 10-year Japanese Government Bond (JGB) yield stands at 1.029%. Furthermore, the BoJ is considering reducing its debt holdings, which could impact market dynamics.