Ella 
EUR/JPY struggled to establish a clear direction after the previous session’s volatility, hovering around 159.20 during the Asian session on Friday. The euro (EUR) found some upside support following mixed Eurozone inflation data on Thursday, providing support for the EUR/JPY cross.
In January, the preliminary Eurozone core consumer price index rose 3.3% year-on-year, beating expectations of 3.2% but slightly lower than the previous reading of 3.4%. The consumer price index came in at an annual rate of 2.8%, in line with expectations and consistent with the previous reading of 2.9%. However, the monthly report showed a 0.4% decline, in stark contrast to December’s 0.2% rise.
However, the euro faces challenges as expectations grow for an interest rate cut by the European Central Bank (ECB) in June, likely due to weak preliminary German consumer price index (CPI) data. This, in turn, may have capped gains in EUR/JPY.
In addition, ECB member Mario Centeno said that if inflation continues on its current trajectory in the coming months, the ECB’s next likely move will be to cut interest rates. If this move comes to fruition, it could signal the start of a cycle aimed at normalizing interest rates.
The yen was supported by the Bank of Japan’s hawkish stance amid geopolitical tensions in the Middle East. Escalating tensions have prompted investors to seek the yen’s safe-haven properties.
Japan’s foreign bond investments recorded inflows of 382.9 billion yen in the week ended January 26, a significant increase from outflows of 43.5 billion yen the previous week. Additionally, foreign investment in Japanese stocks rebounded in the same week, rising to 720.3 billion yen from 287 billion yen the previous week.
