The EUR/JPY pair rose after two days of losses, trading around 183.40 during Asian business hours on Tuesday. Traders will likely be monitoring HCOB Purchasing Managers’ Index (PMI) data from Germany and the Eurozone. Preliminary Consumer Price Index (CPI) and Harmonized Consumer Price Index (HICP) data for December will also be paid attention to later today.
EUR/JPY maintains strength as risk-sensitive euro rises amid easing concerns about broader geopolitical escalation. The United States launched a large-scale military strike against Venezuela on Saturday. US President Donald Trump said that Venezuelan President Nicolas Maduro and his wife were arrested and flown out of the country. Maduro on Monday pleaded not guilty to charges brought against him by the United States in a terrorism and drug case, paving the way 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 indicated they were likely to remain on hold for an extended period. ECB President Christine Lagarde said after keeping interest rates steady in December 2025, rising uncertainty makes it difficult to provide clear forward guidance on future policy decisions.
The upside for EUR/JPY may be limited as the Japanese Yen (JPY) could rise amid growing expectations that the Bank of Japan (BoJ) will continue to raise interest rates this year. Bank of Japan Governor Kazuo Ueda said the central bank will adjust interest rates as economic conditions develop and prices in line with its expectations. Ueda also said the economy is likely to maintain a virtuous cycle of moderate, simultaneous increases in wages and prices.
Frequently asked questions about the euro
The euro is the official currency of the twenty European Union countries that belong to the eurozone. It is the second most traded currency in the world after the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily trading volume of more than $2.2 trillion per day. The EUR/USD is the most widely traded currency pair in the world, accounting for a 30% discount on all transactions, followed by EUR/JPY (4%), EUR/GBP (3%), and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the euro area. The European Central Bank 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 to raise or lower interest rates. Relatively high interest rates – or the expectation of higher interest rates – usually benefit the euro and vice versa. The ECB’s Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by the heads of the eurozone’s national banks and the six permanent members, including the President of the European Central Bank, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is one of the important economic indicators for the euro. If inflation rises beyond expected, especially if it is above the ECB’s 2% target, this forces the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to their counterparts usually benefit the euro, because they make the region more attractive as a place for global investors to park their money.
Data releases measure the health of the economy and can affect the euro. Indicators such as GDP, manufacturing and services PMIs, employment, and consumer confidence 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, it may encourage the European Central Bank to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro will likely fall. Economic data for the four largest Eurozone economies (Germany, France, Italy and Spain) are of particular interest, as they represent 75% of the Eurozone economy.
Another important data 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 during a certain period. If a country produces highly desirable exports, its currency will gain value from the additional demand generated by foreign buyers seeking to purchase these goods. Therefore, a positive net trade balance strengthens the currency and vice versa for a negative balance.
