Ella 
In early European trading on Tuesday, EUR/JPY rose to around 161.60. Uncertainty over the future direction of Japan’s interest rates has weighed on the Japanese yen (JPY) and helped lift EUR/JPY.
Hawkish comments from Bank of Japan (BOJ) Governor Kazuo Ueda failed to boost the yen as traders awaited clearer guidance on the future path of interest rates. Friday’s Tokyo Consumer Price Index (CPI) will be in focus. Bank of Japan Governor Kazuo Ueda said last week that if economic forecasts are accurate, the Bank of Japan may further raise interest rates.
Market participants will also be keeping a close eye on geopolitical tensions in the Middle East. Any signs of escalating tensions could drive safe-haven inflows and boost the yen. According to Aljazeera, Hamas has refused to accept new conditions proposed by Israel in ceasefire negotiations in Egypt and insisted that Israel comply with the terms of recommendations made by US President Joe Biden and the United Nations Security Council.
Philip Lane, chief economist of the European Central Bank (ECB), said the euro zone has made “good progress” so far in containing price pressures. However, the return of inflation to the 2% target is “not yet secure” and interest rates will need to remain restrictive for the time being. Investors will get more information from Germany’s second-quarter gross domestic product (GDP) data released on Tuesday.
Eurozone inflation data will be closely watched later this week. Markets expect the ECB to cut interest rates twice this year, with the next cut coming in September. Expectations of an interest rate cut from the European Central Bank may weigh on the euro against the yen in the short term.
