EUR/JPY holds gains near 183.50 ahead of Germany’s flash CPI data
EUR/JPY gains as the Euro rises on easing US–Venezuela tensions.Germany’s preliminary December CPI and HICP data will be closely watched later on Tuesday.The Japanese Yen may strengthen as expectations grow for further BoJ rate hikes this year.EUR/JPY inches higher after two days of losses, trading around 183.40 during the Asian hours on Tuesday. Traders will likely observe the HCOB Purchasing Managers’ Index (PMI) data from Germany and the Eurozone. Germany’s preliminary Consumer Price Index (CPI) and Harmonized Index of Consumer Prices (HICP) data for December will also be eyed later in the day.
The EUR/JPY cross holds ground as the risk-sensitive Euro (EUR) gains ground amid easing concerns about a broader geopolitical escalation. The United States (US) launched a large-scale military strike against Venezuela on Saturday. US President Donald Trump said Venezuelan President Nicolas Maduro and his wife were captured and flown out of the country. On Monday, Maduro pleaded not guilty to US charges in a narco-terrorism case, setting the stage for an unprecedented legal battle with major geopolitical implications, according to Bloomberg.
The European Central Bank (ECB) kept interest rates unchanged in December 2025 and signaled they are likely to remain on hold for an extended period. ECB President Christine Lagarde said after keeping rates steady in December 2025 that heightened uncertainty makes it difficult to offer clear forward guidance on future policy decisions.
The upside of the EUR/JPY cross could be limited as the Japanese Yen (JPY) could gain ground amid growing expectations that the Bank of Japan (BoJ) will continue raising interest rates this year. BoJ Governor Kazuo Ueda said the central bank will adjust interest rates as economic conditions and prices develop in line with its projections. Ueda also said the economy is likely to maintain a virtuous cycle of moderate, simultaneous wage and price increases.
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
What is the ECB and how does it impact the Euro?The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
How does inflation data impact the value of the Euro?Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
How does economic data influence the value of the Euro?Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
How does the Trade Balance impact the Euro?Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.