EUR/JPY holds below 182.00 as Japan’s Trade Balance softens, German IFO data eyed

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EUR/JPY holds ground after two days of losses, trading around 181.90 during the Asian hours on Wednesday.

EUR/JPY may advance as the Japanese Yen weakens following softer Adjusted Merchandise Trade Balance data from Japan.
Strong exports boosted BoJ hike expectations, with November growth at 6.1%, the fastest in nine months.
Traders will likely watch Germany’s IFO Business Survey, followed by Eurozone core HICP data later in the day.

EUR/JPY holds ground after two days of losses, trading around 181.90 during the Asian hours on Wednesday. The currency cross may appreciate as the Japanese Yen (JPY) faces downward pressure after the release of Japan’s Adjusted Merchandise Trade Balance for November, which came in at JPY 62.9 billion surplus, lower than October’s JPY 74.0 billion.

However, strong export data reinforced expectations of a Bank of Japan (BoJ) rate hike this week. Exports rose 6.1% in November, beating forecasts of 4.8% and marking the fastest growth in nine months. Core machinery orders surged 7%, defying expectations of a 2.3% decline, while imports increased 1.3% year-on-year, extending a third consecutive monthly gain but missing estimates of 2.5%.

Traders become cautious, preferring to wait for the Bank of Japan's policy update before placing new bets. Attention remains focused on the two-day BoJ meeting, concluding on Friday, with investors seeking guidance on the policy path into 2026. BoJ Governor Kazuo Ueda said last week that confidence in the bank’s baseline economic and price outlook is gradually rising, adding that Japan is moving closer to achieving its inflation target.

The Euro (EUR) may regain its ground against its major peers as investors pared back expectations for additional European Central Bank (ECB) easing after officials signaled that further cuts may not be necessary in 2026. Traders will likely observe Germany’s IFO Business Survey data, followed by the Eurozone Core Harmonized Index of Consumer Prices (HICP) data later in the day.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB 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 the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment 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 but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release 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 over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.