EUR/JPY draws some buyers above 160.50 ahead of Eurozone inflation data

• EUR/JPY gains traction to around 160.70 in the first European session on Tuesday, up 0.49% on the day.
• Ishiba’s comments undermine the Japanese yen.
• The ECB’s Lagarde said she was increasingly confident that inflation would fall to the 2% target.

The EUR/JPY cross extends gains to near 160.70 during the European session on Tuesday. Comments from Japan’s new Prime Minister, Shigeru Ishiba, are weighing on the Japanese yen (JPY). Investors are looking to September’s Eurozone Harmonized Index of Consumer Prices (HICP) for further impetus. European Central Bank (ECB) policy makers Luis de Guindos and Isabel Schnabel are also due to speak later on Tuesday.

Conciliatory comments from incoming Japanese Prime Minister Shigeru Ishiba put some selling pressure on the JPY. Ishiba said the Bank of Japan’s (BoJ) monetary policy must remain accommodative to support a fragile economic recovery.

Elsewhere, Japan’s Tankan Large Manufacturing Index showed that general business conditions for large manufacturing companies remained steady in the third quarter (Q3) of 2024. The large manufacturer sentiment index reached 13.0 in Q3 from 13.0 in Q2, as expected.

On the euro front, weaker German CPI inflation data is triggering expectations of a 25 basis point (bps) cut at the ECB’s next policy meeting in October. This, in turn, could limit the upside for the single currency. ECB President Lagarde noted on Monday that the central bank is increasingly confident that inflation will fall to its 2% target and this will be reflected in its next policy move, hinting at yet another interest rate cut to come. Markets are raising their bets on a cut in borrowing costs at the October meeting after Lagarde’s speech.