EUR/JPY advances to near 161.50 ahead of Eurozone HICP data

EUR/JPY appreciates as traders expect the Bank of Japan to keep interest rates steady on Thursday.
Japan’s trade deficit narrowed to ¥117.6 billion in November, down from the previous ¥462.1 billion.
ECB Lagarde noted that the previous bias toward maintaining “sufficiently restrictive” rates is no longer warranted.

EUR/JPY gains ground after registering losses in the previous session, trading around 161.40 during the Asian hours on Wednesday. The Japanese Yen (JPY) experiences losses as traders now seem convinced that the Bank of Japan (BoJ) will keep interest rates steady on Thursday.

Additionally, Japan’s trade data pointed to weak domestic demand amid an uncertain economic outlook and concerns about US President-elect Donald Trump’s tariff plans are contributors to refraining the Bank of Japan from hiking interest rates.

On Wednesday, Japan’s Ministry of Finance announced an unexpected improvement in the trade deficit for November, which narrowed to ¥117.6 billion from October’s ¥462.1 billion. This improvement was primarily attributed to robust export growth, which rose by 3.8% year-on-year in November, while imports fell by 3.8%.

The upside of the EUR/JPY cross could be restrained as the Euro faces challenges as the European Central Bank (ECB) President Christine Lagarde spoke at the Annual Economics Conference, indicating that the central bank is prepared to cut rates further if incoming data confirm that disinflation remains on track. Lagarde also signaled a shift in policy stance, noting that the previous bias toward maintaining “sufficiently restrictive” rates is no longer warranted.

Data released on Monday showed that Eurozone PMI figures surpassed expectations in December. However, Services PMI surveys remain in contraction territory, reflecting mounting concerns about a deepening economic slowdown in Europe, which continues to dampen investor and business sentiment. Traders are now shifting their attention to the Eurozone Harmonized Index of Consumer Prices (HICP) data, set to be released on Wednesday.