The EUR/JPY cross extended losses to around 171.45 in early European trading on Friday, as the euro came under pressure following disappointing German Retail Sales data. Market focus now turns to the preliminary August Consumer Price Index (CPI) from Germany, due later in the session, alongside remarks from European Central Bank (ECB) Vice President Luis de Guindos.
German retail sales weigh on the Euro
Fresh data from Destatis showed that German Retail Sales fell 1.5% month-on-month in July, sharply below expectations for a 0.4% drop and reversing June’s 1.0% rise. On an annual basis, sales rose 1.9%, down from 4.9% previously and short of the 2.6% market forecast. The softer numbers dragged the euro lower, with investors wary that weaker consumption could complicate the ECB’s monetary outlook.
Japanese Yen finds support in Tokyo CPI
The Japanese yen gained modest traction after Tokyo released its August CPI report. Headline inflation eased to 2.6% year-on-year from July’s 2.9%, marking a third consecutive month of moderation but still holding above the Bank of Japan’s (BoJ) 2% target.
Meanwhile, Tokyo’s core CPI slowed to 2.5% YoY, in line with expectations, while the CPI excluding fresh food and energy—a metric closely watched by the BoJ—rose 3.0% YoY, just below July’s 3.1%. Despite the moderation, the report keeps alive expectations for further BoJ tightening, with a recent Reuters poll showing nearly two-thirds of economists now anticipate another 25 basis point rate hike, up from just over half a month earlier.
Market outlook
EUR/JPY remains pressured below 171.50 as traders weigh weak German data against resilient Japanese inflation. The next directional cue will likely come from Germany’s CPI print and ECB commentary later today.
