EUR/JPY - Euro to Japanese yen

EUR/JPY, or euro to Japanese yen, is a heavily traded currency pair. The Eurozone is the world's second largest economic region while Japan is the world's fourth-largest economy. As a safe haven currency, the yen tends to depreciate when global economic growth is high while sharply appreciating during downturns. The euro, on the other hand, tends to move in the opposite direction. Thus, the pair is often seen as a proxy for global sentiment. Prior to the French elections of 2017, investors went short EUR/JPY in order to hedge their long euro positions. Following the elections, the pair strengthened sharply as optimism returned to the Eurozone. 

Outlook
Bearish

Euro daily update

The euro is currently steady against all major currencies. Yesterday, the euro rebounded against the US dollar after making four consecutive lower-lows earlier this week. After the euro moved into oversold territory, we have been calling for a short-term rebound. Today's EUR/USD trading range is 1.130 - 1.1530. 

There are no significant fundamental developments related to the euro today. Similar to what we saw yesterday, euro trading is mostly a function of risk sentiment. As currency markets are mostly directionless today, the euro is also unchanged. 

Turning to economic data, we'll see final inflation figures for the Eurozone later today. As the numbers are usually in line with the initial estimate, the data is unlikely to have a significant impact on the currency. In other news, Bundesbank Beermann's speech did not address monetary policy. Thanks to slowing growth and peaking inflation, the Eurozone's economy is likely to continue weakening. Our outlook on the euro remains bearish. 

EUR/USD is up and trading above 1.1380. The euro is down slightly against the yen, with EUR/JPY trading above 126.0. Finally, the euro is up slightly against the pound, with EUR/GBP above 0.8950. 

Date Event Actual Previous
August 14 Germany GDP Growth Rate YoY Flash Q2 2% 2.1%
August 14 Germany Harmonised Inflation Rate YoY Final JUL 2.1% 2.1%
August 14 Germany Inflation Rate YoY Final JUL 2% 2.1%
August 14 Eurozone GDP Growth Rate YoY 2nd Est Q2 2.2% 2.5%
August 14 Eurozone Industrial Production YoY JUN 2.5% 2.6%
August 14 Eurozone ZEW Economic Sentiment Index AUG -11.1 -18.7
August 14 Germany ZEW Economic Sentiment Index AUG -13.7 -24.7
August 15 Bundesbank Beermann Speech
August 16 Germany Wholesale Prices YoY JUL 3.5% 3.4%
August 16 Eurozone Balance of Trade JUN €16.5B
August 17 Eurozone Current Account JUN €4.6B
August 17 Eurozone Core Inflation Rate YoY Final JUL 0.9%
August 17 Eurozone Inflation Rate YoY Final JUL 2%
Updated 

Japanese yen daily update

The Japanese yen is mixed today. The yen is weakening against the euro and the Australian dollar, while strengthening against the US dollar and the British pound. Yesterday, the yen weakened and fell against the US dollar. Notably, USD/JPY is running into sellers above ¥111.0 despite steadying risk sentiment. Today's USD/JPY trading range is 110.10 - 113.20.

Taking a look at financial markets yesterday, risk sentiment improved following news that China's vice-commerce minister will lead a delegation to the US to revive trade talks between the two countries. The news boosted risk sentiment during the Asian trading session. Sentiment was further enhanced by solid US earnings reports, supporting US stock markets. Risk currencies finished the day higher, while the safe haven yen was lower. Risk assets have come under strong selling pressure in recent history. Yesterday's recovery in 'risk on' currencies will be a a welcome relief, but the outlook for global growth remains negative. Our outlook for the Japanese yen remains bearish.

USD/JPY is currently trading above 110.70. EUR/JPY is up slightly, and trading above 126.30. GBP/JPY is down slightly, and trading above 140.80.

Date Event Actual Previous
August 14 Capacity Utilization MoM JUN -2.2% -2.1%
August 14 Industrial Production YoY Final JUN -0.9% 4.2%
August 16 Balance of Trade JUL -¥231B ¥721B
August 16 Exports YoY JUL 3.9% 6.7%
August 16 Foreign Bond Investment 11/AUG ¥123.9B ¥1171B
August 16 Stock Investment by Foreigners 11/AUG ¥-107.1B -¥225.2B
August 16 Imports YoY JUL 14.6% 2.5%
Updated 

Euro to Japanese yen Outlook

Outlook
Bearish

Updated 

Euro analysis

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Euro bull case challenged by political risks and slowing growth

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Japanese yen analysis

Japanese yen: safe haven or inflation proxy?

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EUR/JPY: An “easy” long idea gets trickier

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Japanese yen: Bank of Japan versus interest rates

Japan has suffered from weak growth and inflation since the global financial crisis, and the Bank of Japan has frequently experimented with unorthodox monetary policies. In September 2016, the BoJ decided to directly target long-term interest rates. The so-called “yield curve control” (YCC) program fixed 10-year Japanese government bond (JGB) yields at 0%. If yields deviated from the BoJ’s target…

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Tags: Japanese yen

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