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EUR/JPY - The Euro Wobbles on Poor PMI Data
23.06.2022

The Euro sees the largest decline within a single hour this month, after the Eurozone released its latest PMI (Purchasing Managers Index) reports. The EUR/JPY has declined by 1.05% so far today and has surpassed yesterday’s price lows. When looking at the week as a whole, the price is still higher than the market open, but whether it will stay in the positive zone by the end of the week is now at risk based on the latest data.

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The economic release was related to the German, French and overall Eurzone Purchase Manager Indexes. There are two main indexes based on the service sector and manufacturing sector. In the German manufacturing sector, the PMI Report decreased from 54.8 to 52.0, and in the service sector from 52.4 to 55.0 points. In the EU, the overall indicator fell from 56.1 to 52.8. Both reports were lower than expected and edge closer to the 50.0 mark which indicates the difference between possible growth and contraction. The latest report has traders asking whether the indices will continue to decline as today’s losses were considerable. The French PMI has also declined.

Economists and analysts have advised that most households have decided to switch to saving mode due to the high level of inflation and fears of shortages. Of course further spending cuts will only increase the risks of recession for not only Germany but the Eurozone in general.

This week the Bank of Japan released the minutes report which gives details on what was discussed during the latest meeting. According to these minutes, the country’s bankers are worried about the sharp decline of the Yen as well as the possibility of it continuing to decline. Nonetheless, the central bank has confirmed that it still aims to maintain an expansionary monetary policy.

The level of inflation in Japan is currently at 2.5%, which is positive and not at a harmful level like in Europe. However, economists have advised that the economic growth and inflation is extremely vulnerable and at a high risk of collapsing. It is for this reason that the central bank is cautiously taking a dovish view. The Japanese Prime Minister also agreed with the Bank of Japan and advised that the central bank did not need to follow other global regulators.

In this specific scenario it is important to monitor both the Euro currency Index as well as the Yen Index. The Euro Index has already lost gains made over the past two days, declining by 0.64% which is the highest loss since May 12th. The Yen Index, on the other hand, has increased in value even though the price remains relatively low and much lower than average pricings.

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