Euro to Japanese Yen Exchange Rate Extended Slump despite BoJ?s Easing Hints

At the end of the week the Euro to Japanese Yen (EUR/JPY) exchange rate trended lower, as Eurozone data proved mixed and investors dismissed the latest comments from the Bank of Japan (BoJ).

Mixed Eurozone GDP Results Saw Euro Exchange Rate Weaken

In spite of news that Germany’s first quarter GDP had bettered expectations this was not enough to strengthen the Euro (EUR) on Friday.

While German economic growth climbed from 1.3% to 1.6% on the year markets remained concerned by recent signs of slowness within the Eurozone’s powerhouse economy, muting any positive reaction to the data.

Sentiment deteriorated further when the corresponding Eurozone GDP figure was found to have been revised lower from its first estimate, dropping from 1.6% to 1.5%.

Overshadowing the positive German result further, this fuelled fresh speculation that the European Central Bank (ECB) might well be prompted to loosen monetary policy again sooner rather than later.

Dovish BoJ Comments Fail to Diminish Japanese Yen Demand

Japanese data continued to underwhelm, meanwhile, as the Tertiary Industry Index demonstrated a deepening contraction in output on the month.

Bank of Japan (BoJ) Governor Haruhiko Kuroda reiterated the central bank’s commitment to meeting its 2% inflation target, also making note of the fact that policymakers still have ‘ample’ tools available to them in the event of further easing.
However, as markets remain decidedly sceptical of the ability of central banks to stimulate growth amidst persistent global slowdown pressures these comments failed to do anything to dent the resurgent Japanese Yen (JPY).

With risk appetite waning a fresh surge of safe-haven demand saw investors piling back into the Yen ahead of the weekend, continuing to ignore signs of increasing turmoil within the domestic economy.

Consequently, towards the close of Friday’s European session the Euro to Japanese Yen (EUR/JPY) exchange rate was slumped around 123.28000.

Japanese GDP Forecast to Provoke EUR/JPY Volatility

Confidence in the Yen could continue to outpace rivals next week if the first quarter Japanese GDP shows the expected improvement on the year, with investors hoping to see a return to positive growth.

Given recent trends surrounding the Yen, however, a weaker showing may not be sufficient incentive for markets to move away from the favoured safe-haven.

The finalised Eurozone Consumer Price Index for April, meanwhile, could offer some support for the softened Euro, with reassurance of stronger inflationary pressure likely to reduce bets of ECB action.

Progress towards the final signing off of the current Greek bailout review, or a lack thereof, is also expected to influence demand for the single currency, with signs of delays likely to undermine the EUR/JPY exchange rate.