30 Oct 2024

overview

The EUR/JPY currency pair seeks a stable breakthrough above the 166.00 level during the European session on Wednesday. The pair is attempting to advance further, bolstered by an enhanced outlook for the Euro (EUR) following a series of economic reports from the Eurozone and its key regions.

The Eurozone flash  (GDP) data shows that the economy expanded by 0.9% year-on-year in the third quarter of the year, faster than estimates of 0.8% and the 0.6% growth in the April-June period. Quarterly GDP growth was 0.4%, double the estimates and the former release of 0.2%.

The resurgence of the German economy, following a contraction in the second quarter, has bolstered the Euro. The economy experienced an unexpected growth of 0.2%, contrasting with economists' predictions of a continued decline of 0.1%. Additionally, the preliminary Harmonized Index of Consumer Prices across six German states has exceeded expectations, leading traders to reduce their dovish outlook for the European Central Bank (ECB) ahead of the December meeting.

Market forecasts indicate that the likelihood of the ECB lowering its Deposit Facility Rate by 50 basis points in December has decreased to 22%, down from 45%, following the release of GDP and inflation figures.

In Tokyo, investors are keenly anticipating the Bank of Japan’s (BoJ) policy meeting scheduled for Thursday. The BoJ is projected to maintain interest rates at 0.25%. Recently, the Japanese Yen (JPY) has faced pressure due to market sentiments regarding the BoJ's inability to raise interest rates further, as traders express concerns over economic stability following the Liberal Democratic Party's (LDP) failure to secure a majority in national elections.

Any indications of a hawkish stance on interest rates could lead to a significant recovery in the Japanese Yen, while potential declines may be constrained if the BoJ continues to rely on forthcoming data.