- The EUR/JPY stabilizes around 161.85 in the first bars of the European session on Friday.
- Japan IPC inflation grew by 3.6% year -on -year in March.
- The ECB cut the rates at 25 basic points at 2.25% at the April meeting on Thursday.
The EUR/JPY crossing flat about 161.85 during the European session on Friday. The trade war of US President Donald Trump remains a source of deep uncertainty. However, Trump offered on Thursday some encouraging signs that negotiations with other countries could lead to lower tariffs. Optimism about commercial conversations could weaken refuge coins such as Japanese Yen (JPY).
The National Consumer Price Index (CPI) of Japan grew by 3.6% year -on -year in March, marking three consecutive years in which the general inflation figure is above the 2% target of the Bank of Japan (BOJ), revealed the Bureau of statistics of Japan on Friday. This figure was less than 3.7% registered in February.
Meanwhile, the so-called “underlying-underground” inflation rate, which excludes fresh food prices and energy, increased to 2.9% year-on-year in March from 2.6% in February. The underlying inflation, which excludes fresh food prices, jumped at 3.2% interannual in March from the previous reading of 3.0%. The figure was in line with the market consensus.
The data arrive before the BOJ’s policy meeting on May 1. The BOJ is expected to maintain stable interest rates at 0.5% and cut their growth estimates, since Trump tariffs cloud the economic perspectives. The operators also closely monitor the developments in the specific commercial negotiations of each country.
In the front of the euro, the European Central Bank (ECB) cut its main interest rate in a percentage quarter to 2.25% at its April meeting on Thursday, citing the growing increase in commercial tensions after Trump’s tariffs unleashed a global commercial war. The president of the ECB, Christine Lagarde, said during the press conference that US tariffs on EU assets, which had increased from an average of 3% to 13%, were already harming the prospects of the European economy.
The moderate ECB posture could weigh on the common currency against JPY. “It has a moderate tone. The approach has moved towards the evaluation of the downward risk for growth perspectives, instead of upward risk for inflation,” said Kirstine Kundby-Nielsen, a currency analyst at Danske Bank.
FAQS inflation
Inflation measures the rise in prices of a representative basket of goods and services. General inflation is often expressed as an intermennsual and interannual percentage variation. The underlying inflation excludes more volatile elements, such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. The underlying inflation is the figure on which economists focus and is the objective level of central banks, which have the mandate of maintaining inflation at a manageable level, usually around 2%.
The consumer price index (CPI) measures the variation in the prices of a basket of goods and services over a period of time. It is usually expressed as an intermennsual and interannual variation. The underlying IPC is the objective of the central banks, since it excludes the volatility of food and fuels. When the underlying IPC exceeds 2%, interest rates usually rise, and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually translates into a stronger currency. The opposite occurs when inflation falls.
Although it may seem contrary to intuition, high inflation in a country highlights the value of its currency and vice versa in the case of lower inflation. This is because the Central Bank will normally raise interest rates to combat the greatest inflation, which attracts more world capital tickets of investors looking for a lucrative place to park their money.
Formerly, gold was the asset that investors resorted to high inflation because it preserved their value, and although investors often continue to buy gold due to their refuge properties in times of extreme agitation in the markets, this is not the case most of the time. This is because when inflation is high, central banks upload interest rates to combat it. Higher interest rates are negative for gold because they increase the opportunity cost to keep gold in front of an asset that earns interest or place money in a cash deposit account. On the contrary, lower inflation tends to be positive for gold, since it reduces interest rates, making bright metal a more viable investment alternative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
