Yen faces challenges, Eurozone retail sales disappoint

EURJPY continues its winning streak for the sixth consecutive session, trading around 172.80 in European markets on Thursday. The currency cross holds ground after the disappointing Eurozone Retail Sales data, which rose 2.2% year-over-year in July, against the expected 2.4% growth and 3.5% increase prior.

Meanwhile, monthly sales declined by 0.5%, worse than the expected 0.2% decline, and swung from the previous 0.6% increase. Attention will shift toward Eurozone Gross Domestic Product (GDP) for the second quarter and Germany’s July Factory Orders due on Friday.

The Euro receives support as persistent inflation in the Eurozone boosted sentiment that the European Central Bank will keep interest rates unchanged at September’s meeting. Eurozone Harmonized Index of Consumer Prices (HICP) rose 2.1% YoY in August, above both market expectations and the ECB’s 2.0% target.

Additionally, the EURJPY cross also draws support as the Japanese Yen loses ground against its peers, driven by the uncertainty over the timing and pace of Bank of Japan rate hikes.

BoJ Governor Kazuo Ueda reaffirmed on Wednesday that the policy path for rate hikes remains intact, provided growth and inflation evolve as expected. Investors now await Friday’s wage data for additional policy signals.

Japan’s trade negotiator Ryosei Akazawa noted on Thursday that he was visiting the US as administrative talks progress. Akazawa further added that he will continue to push for a presidential order for the tariffs that have been agreed on.

The JPY also faces challenges amid Japan’s mounting political instability, after the Secretary-General of the Liberal Democratic Party (LDP), Hiroshi Moriyama, a close ally of Prime Minister Shigeru Ishiba, said on Tuesday that he intends to resign. This has intensified concerns over Ishiba’s leadership as pressure builds after the election loss.

(Source: OANDA)