EUR/JPY is trading around 179.60 on Monday, little changed on the day after retreating from last week’s multi-year high just shy of 180.00. The pair remains stuck in consolidation, squeezed between a Japanese Yen (JPY) supported by domestic data and geopolitical caution, and a Euro (EUR) buoyed by a modest improvement in the Eurozone’s growth outlook.
Yen finds support from softer-than-feared GDP and geopolitical tension
Japan’s Cabinet Office reported that Q3 GDP contracted 0.4% QoQ, a milder decline than the 0.6% drop expected. Annualized GDP fell 1.8%, also better than the forecasted 2.5% decline. While the data highlight the economy’s ongoing fragility, they reduce expectations for an imminent Bank of Japan (BoJ) rate hike.
Prime Minister Sanae Takaichi continues to favour accommodative policy to support households, while BoJ Governor Kazuo Ueda notes steady consumption and a tightening labour market, stressing that underlying inflation is gradually approaching the 2% target. His tone keeps the option of a future policy adjustment open, but only when conditions align.
Geopolitical unease is also underpinning demand for the Yen. Rising tensions between China and Japan over Taiwan – and sharp rhetoric exchanged between both sides – have weighed on risk sentiment in Asia, prompting investors to seek the JPY’s safe-haven qualities.
Euro supported by upgraded Eurozone outlook
The Euro, meanwhile, is drawing support from a more upbeat European Commission forecast. Brussels upgraded its 2025 Eurozone growth projection to 1.3% from 0.9%, citing stronger-than-anticipated investment, a surge in earlier-year exports, and the upcoming entry of Bulgaria into the currency bloc, which mechanically lifts the region’s overall growth calculation.
Still, the Commission warned that risks remain skewed to the downside, pointing to renewed trade tensions, persistent geopolitical uncertainty, and global financial vulnerabilities. Nonetheless, it emphasised that the EU economy continues to expand despite an “adverse” backdrop.
This more constructive outlook aligns with the European Central Bank’s cautious tone, reinforcing expectations of an extended policy pause – offering the Euro modest support.
Pair holds steady as markets await fresh catalysts
With a mildly supported Euro on one side and persistent defensive demand for the Yen on the other, EUR/JPY remains directionless around 179.60. Traders now look ahead to new macroeconomic triggers before the cross can break out of its consolidation phase.
