EUR/JPY edges higher on Eurozone inflation expectations but bearish pressures remain

EUR/JPY edges higher on a stronger Euro but fails to build on gains due to conflicting data from the Eurozone. 

The Yen benefits from heightened expectations of the BoJ hiking interest rates in December, increasing inflows into the Yen.

Lawmakers in Japan are debating a supplementary budget which could deliver cash handouts to households and stoke inflation. 

EUR/JPY edges higher to just below the 160.00 level on Thursday after survey data released by the European Commission suggested stubborn inflation expectations might keep interest rates more elevated than previously thought in the Eurozone. This supports the Euro (EUR) since higher interest rates support foreign capital inflows. However, weaker German inflation data contradicts the survey’s findings and keeps the Single Currency under pressure.

“The European Commission survey was little changed in November and is still consistent with weak growth at best, while the price components suggest that inflationary pressures remain sticky,” said Elias Hilmer, assistant economist at Capital Economics of the data.

The Japanese Yen (JPY), meanwhile, trades mixed. On the one hand it is pressured by political risk due to the ruling party’s tenuous grip on power, whilst on the other hand it remains underpinned by expectations the BoJ will raise interest rates at the end of the year.