Weak Eurozone data and BoJ tightening bets lift Japanese Yen, weigh on Euro

0.13% lower on Friday, EUR/JPY faces a mixed set of European economic figures.
A 0.7% fall in September Eurozone Retail Sales far exceeded the 0.1% decline forecast.
Expectations of a December rate rise in Japan, alongside wider risk aversion, support the Japanese Yen.

EUR/JPY is down 0.13% on Friday. At the time of writing, the pair is trading around 176.80. Mixed Eurozone economic releases weigh on the cross. Meanwhile, expectations of additional interest rate increases by the Bank of Japan (BoJ), coupled with broader risk aversion, underpin the Japanese Yen (JPY).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A 0.7% month-on-month fall in September Eurozone Retail Sales signals softer consumer demand in Friday's European data. Eurostat reported the decline after a revised 2% contraction in August, against market forecasts for a smaller 0.1% fall. Annual Retail Sales growth eased to 0.4% in September from 1.3% a month earlier, also undershooting the 0.6% consensus estimate. The figures indicate continued weakness in European household demand. This could weigh on the region's growth prospects and constrain any recovery in the Euro (EUR).

Earlier on Friday, German Industrial Production posted a 0.7% month-on-month increase for September. Although stronger than the flat reading expected, growth slowed from August's revised 1%. Automotive and pharmaceutical output provided the main support, while construction and the manufacture of machinery and equipment declined.

Energy inflation could affect wage bargaining and price-setting throughout the economy, European Central Bank (ECB) Chief Economist Philip Lane said on Friday. He emphasised that monetary policy must curb the spillover effects of inflationary pressures. Lane also reiterated the need to return inflation to the ECB's target within one to two years.

Financial conditions had tightened, Lane added. Fiscal policy had proved more expansionary than anticipated but was likely to turn more restrictive from next year. He remained cautious about forthcoming ECB decisions, stressing that more information was needed before the December meeting.

Expectations for Japanese monetary policy remain supportive of the Yen. Published on Thursday, the minutes of the BoJ's September meeting indicated agreement among policymakers that gradual interest rate increases and adjustments to the degree of monetary accommodation should continue.

A faster pace of tightening was favoured by some members, strengthening market expectations that another rate increase could come as early as December. As investors weigh the two central banks' diverging policy paths, this outlook supports the Japanese currency, particularly against the Euro.

Demand for the Japanese Yen also continues to benefit from broader risk aversion, reflecting its traditional safe-haven status. Together, defensive flows and monetary policy expectations maintain downward pressure on EUR/JPY.

Euro Performance Today

Against the major currencies listed below, the Euro (EUR) recorded its strongest performance versus the New Zealand Dollar today. The table presents today's percentage movements.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.39%	0.40%	0.28%	0.37%	0.85%	0.93%	0.09%
EUR	-0.39%		0.01%	-0.14%	-0.01%	0.47%	0.53%	-0.32%
GBP	-0.40%	-0.01%		-0.13%	-0.02%	0.46%	0.52%	-0.33%
JPY	-0.28%	0.14%	0.13%		0.12%	0.59%	0.66%	-0.19%
CAD	-0.37%	0.01%	0.02%	-0.12%		0.47%	0.54%	-0.30%
AUD	-0.85%	-0.47%	-0.46%	-0.59%	-0.47%		0.07%	-0.78%
NZD	-0.93%	-0.53%	-0.52%	-0.66%	-0.54%	-0.07%		-0.83%
CHF	-0.09%	0.32%	0.33%	0.19%	0.30%	0.78%	0.83%

Percentage movements between major currencies are displayed in the heat map. Select the base currency from the left-hand column and the quote currency from the top row. For instance, choosing the Euro on the left and following that row across to the US Dollar gives the percentage change for EUR (base)/USD (quote) in the intersecting cell.