EUR/JPY approaches 180.00 on weak data, Yen intervention threats

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EUR/JPY approaches 180.00 on weak data, Yen intervention threats

The Euro reaches session lows at 180.30 against the Yen, down from all-time highs at 181.41.
Eurozone and German business activity data disappointed on Friday.
Intervention threats and strong Japanese inflation data have provided some support to the Yen.

The Euro snapped a four-day rally against the Japanese Yen on Friday and is dropping about 0.7% on the day so far, reaching session lows at 180.30. The pair is retreating from the all-time high of 181.41 hit on Thursday, weighed down by downbeat Eurozone macroeconomic data and threats of intervention from Japanese authorities.

Eurozone’s Preliminary HCOB Purchasing Manager’s Index figures for November have disappointed investors. Manufacturing activity contracted to a 49.7 reading after having reached a standstill in October, against expectations of an improvement to 50.2. The Services sector expanded, although at a slower pace of 52.4, missing the market consensus of a steady 52.5 reading.

Likewise, German business activity added to evidence of the weak momentum of the region’s leading economy, adding pressure on the Euro. The German Manufacturing sector accelerated its contraction to a 48.4 in November from October's 49.6 reading, while the services PMI eased to 52.7 from 54.6, well beyond market expectations of a more moderate slowdown to a 53.9 reading

Intervention threats boost Yen recovery

The Yen, on the other hand, has received some support from comments by the Japanese Finance Minister. Satsuki Katayama, who said in a news conference on Friday, that Japanese authorities are ready to take “appropriate action” against excessive volatility, which has been seen as a clear warning of intervention.

Somewhat earlier, Japan’s Statistics Office released the National Consumer Prices (CPI) Index report, revealing higher inflationary pressures in October. The headline CPI accelerated to a three-month high at 3.0%, from 2.9%, with the core CPI showing identical numbers.

These figures have heightened hopes that the Bank of Japan might raise interest rates in the next meetings, in December or January, despite political pressures to keep an expansive monetary policy. The BoJ Governor, Kazuho Ueda, reinforced this view in a testimony at the parliament, where he warned about higher inflationary risks stemming from a weak Yen, which might push import costs and broader consumer prices higher.

Economic Indicator

HCOB Manufacturing PMI

The Manufacturing Purchasing Managers Index (PMI), released on a monthly basis by S&P Global and Hamburg Commercial Bank (HCOB), is a leading indicator gauging business activity in the Eurozone manufacturing sector. The data is derived from surveys of senior executives at private-sector companies from the manufacturing sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the Euro (EUR). Meanwhile, a reading below 50 signals that activity among goods producers is generally declining, which is seen as bearish for EUR.

Economic Indicator

HCOB Services PMI

The Services Purchasing Managers Index (PMI), released on a monthly basis by S&P Global and Hamburg Commercial Bank (HCOB), is a leading indicator gauging business activity in the Eurozone services sector. As the services sector dominates a large part of the economy, the Services PMI is an important indicator gauging the state of overall economic conditions. The data is derived from surveys of senior executives at private-sector companies from the services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Euro (EUR). Meanwhile, a reading below 50 signals that activity among services providers is generally declining, which is seen as bearish for EUR.