EUR/JPY is trading higher on Friday, staging a modest rebound after touching its lowest level since September 9 in the previous session. The pair is last seen near 173.00, supported by broad Yen weakness amid political uncertainty and soft domestic data.
Yen under pressure from politics and labor market signals
The Japanese Yen continues to face selling pressure against major peers as investors focus on the Liberal Democratic Party’s leadership election this weekend, which will effectively determine the country’s next prime minister. The political transition adds uncertainty at a time when economic signals are softening.
Japan’s unemployment rate rose to 2.6% in August from 2.3% in July, overshooting expectations of 2.4%. The uptick reinforces signs of cooling in the labor market, further weighing on sentiment toward the Yen.
Euro gains capped by weak Eurozone data
The Euro’s upside remains limited as fresh data from the Eurozone proved underwhelming. The HCOB Composite PMI for September ticked up to 51.2 from 51.0 in August, matching expectations. Services PMI improved to 51.3 from 50.5 but came in just below forecasts of 51.4.
In addition, Eurozone Producer Prices fell 0.3% MoM in August, worse than the expected 0.1% decline, while July had posted a 0.3% increase. On a yearly basis, PPI dropped -0.6% YoY, below expectations for a 0.4% fall and sharply lower than July’s 0.2% gain. The weak inflation data adds to evidence of subdued price pressures, limiting the Euro’s ability to extend gains.
BoJ outlook in focus
Bank of Japan Governor Kazuo Ueda struck a cautiously hawkish tone in a speech on Friday, signaling the central bank remains prepared to raise rates if the economic and inflation outlook justify it. However, he also acknowledged global headwinds, including softening US labor market trends and tariff-related risks, which could slow corporate wage growth and complicate the timing of further policy adjustments.
