The EUR/JPY pair surrendered half of its intraday gains on Friday, dropping to around 157.50 following the release of the flash Eurozone, Germany, and France PMI data for February. The Eurozone Composite PMI remained steady at 50.2, slightly below market expectations of 50.4.
During European trading hours, the EUR/JPY reached an intraday high of 158.23 but faced selling pressure after the PMI reports. The data revealed that the French Composite PMI contracted for the sixth consecutive month.
In contrast, Germany saw an expansion in overall business activity at a faster-than-anticipated pace, providing some relief to the Eurozone. The manufacturing sector continued to contract, albeit at a slower pace, while service sector activity expanded, though not as robustly as expected. Earlier in the day, the Euro was underperforming its riskier peers amid a generally risk-on market environment.
Mixed PMI impacts EUR/JPY trading
Traders have priced in multiple interest rate cuts by the European Central Bank for the year, based on the confidence that Eurozone inflation will sustainably return to the ECB’s 2% target. Meanwhile, the Japanese Yen weakened overall as its safe-haven appeal diminished.
However, the outlook for the Yen remains strong due to higher-than-expected CPI data for January, leading to increased market expectations that the Bank of Japan may raise interest rates again this year. Japan’s headline CPI came in at 4%, surpassing the 3.6% reading in December—the highest since January 2023. The mixed economic data from the Eurozone and Japan painted a complex picture for investors in currency markets.
The EUR/JPY pair faced a volatile session, influenced by the steady PMI figures from the Eurozone and rising inflation in Japan.
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