English
EUR / JPY Reverses Pullback From YTD High As ECB Vs. BoJ Play Favors Bulls, German Inflation Monitored
EUR / JPY gains bids to reverse yesterday's retreat from 10-week high. Strong inflation data from Spain and France, coupled with hawkish ECB discussions, keep buyers optimistic. Incoming BoJ officials defend the cheap money policy to benefit JPY bears. The preliminary readings of Germany's HICP data for February are anticipated to provide a boost.
As Tokyo opens on Wednesday, EUR / JPY regains upside momentum above 144.00. As a result, the cross-currency pair gains offers, erasing the previous day's reversal from the highest levels since late December amid cautious market optimism.
Nonetheless, the quote reversed from its multi-day high on Tuesday as the Yen pair celebrated muddled economic data while struggling to respect the incoming Bank of Japan (BoJ) officials' overall hawkish comments. However, optimistic inflation data from France and Spain subsequently rekindled the quote's upward momentum.
It should be noted that prospective Bank of Japan (BoJ) Deputy Governor Shinichi Uchida defended the central bank's easy money policy before the Japanese parliament's Upper House. By doing so, Uchida eliminates the possibility of modifying the 2.0% inflation target and fortifying the Yield Curve Control (YCC) policy.
In terms of the data, January's disappointing Industrial Production (IP) numbers contrasted with a welcome increase in the nation's Retail Trade figures, but failed to provide any clear guidance for the USD/JPY. Despite this, Japan's IP decreased 4.6% in January, compared to the expected decrease of 2.6% and prior growth of 0.3%. However, the Retail Trade grew 1.9% MoM on a seasonally adjusted basis, compared to 1.1% previously and -0.2% market expectations.
Elsewhere, preliminary readings of the Spanish and French Consumer Price Index (CPI) for February indicated positive outcomes and bolstered hawkish concerns regarding the European Central Bank's (ECB) next move, which contrasts with the BoJ's bias.
The combination of mostly negative Japanese data and the divergence in monetary policy between the ECB and the BoJ has kept EUR / JPY investors optimistic.
A light economic calendar in Japan may allow EUR / JPY investors to maintain control on Wednesday morning. However, the first estimates of Germany's key inflation gauge for February, namely the Harmonized Index of Consumer Prices (HICP), could threaten the pair's upward momentum if they fall short of the optimistic 0.7% MoM forecasts, compared to 0.5% previously.
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