Ella 
EUR/JPY rose for the sixth straight day in early European trading on Wednesday, now trading near 173.80. The yen weakened after data showed that business activity in Japan turned to contraction in June.
Japan’s final services purchasing managers’ index fell to 49.4 in June from 49.8 in May. The reading was the biggest drop since January 2022 and one of the biggest declines on record, which put some selling pressure on the yen and benefited the pair. On the other hand, the possibility of foreign exchange intervention by the Bank of Japan (BoJ) may support the yen in the short term.
On the euro side, the initial annual rate of the eurozone’s harmonized index of consumer prices (HICP) slowed from 2.6% in May to 2.5% in June. However, these inflation reports are unlikely to prompt the ECB to cut interest rates again at its next policy meeting on July 18. Bert Colijn, senior eurozone economist at ING, said, “These data will not prompt the ECB to cut rates again in July, and we think the ECB will eagerly await summer data before seriously discussing the next rate cut in September.”
On Monday, European Central Bank President Christine Lagarde said recent economic developments suggest further rate cuts are not urgent. Divergence between the eurozone and Japan on monetary policy continues to support the euro for the time being.
