• EUR/JPY edges slightly higher despite weaker-than-expected German inflation data.
• Markets' attention turns to the Eurozone preliminary inflation figures for fresh clues on the ECB’s policy outlook.
• Repeated intervention warnings from Japanese authorities continue to limit the pair's upside potential.

EUR/JPY trades modestly higher on Tuesday, hovering around 185.10 at the time of writing, up 0.07% on the day. The pair is supported by a resilient Euro (EUR) despite softer-than-expected German inflation data. At the same time, the Japanese Yen (JPY) remains weighed down despite repeated warnings from Tokyo officials over excessive currency moves.

Data released in Germany showed that inflation slowed more than expected in June. The Consumer Price Index (CPI) rose 2.3% YoY, down from 2.6% in May and below the market forecast of 2.5%. Meanwhile, the Harmonized Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred inflation gauge, also came in below expectations, rising 2.4% annually after 2.7% previously, while falling 0.2% on a monthly basis.

The figures reinforce signs that inflationary pressures continue to ease in the Eurozone's largest economy. Earlier in the day, Dutch Central Bank Governor Olaf Sleijpen said that lower energy prices following the easing of Middle East tensions should help cool inflation further. However, ECB policymakers Pierre Wunsch and Joachim Nagel warned that inflation could remain above the 2% target for several more quarters, arguing that the geopolitical situation remains highly uncertain.

Investors also digested stronger-than-expected German Retail Sales data. According to Destatis, Retail Sales increased by 1.1% MoM and 1.8% YoY in May, beating market expectations and pointing to resilient consumer spending despite higher inflation.

Attention now shifts to Wednesday's preliminary Eurozone HICP release, which could provide further guidance on the ECB's interest rate outlook.

On the Japanese side, the Japanese Yen (JPY) continues to receive support from intervention risks. Chief Cabinet Secretary Minoru Kihara reiterated that authorities stand ready to take action in the foreign exchange market if necessary, while Finance Minister Satsuki Katayama said the government would respond appropriately to currency moves whenever needed. Meanwhile, discussions within the Bank of Japan (BoJ) continue to support expectations for gradual monetary policy normalization, although Japan's still-low interest rates continue to limit the Japanese Yen's broader appeal.