• EUR/JPY fell to 163.35 in Wednesday’s early European session.
• Factory orders in Germany fell by 5.4% m/m in November against the expected 0%.
• Traders remain cautious about the timing of the next interest rate hike, which could impact the JPY.

The EUR/JPY cross rate is paring recent gains to around 163.35 in early European trading on Wednesday. The euro (EUR) is under selling pressure after macroeconomic data from Germany. However, the negative effects on this currency may be narrow given the uncertainty about the timing of the next interest rate boost by the Bank of Japan (BoJ).

Data released Wednesday by the Federal Statistical Office showed that factory orders in Germany unexpectedly fell in November, highlighting the industry’s problems just weeks before the election of Chancellor Olaf Scholz. Factory orders in Germany fell 5.4% m/m in November, compared with a decline of 1.5% in the previous reading. This value turned out to be weaker than expected at the 0% level. The common currency is weakening against the Japanese yen (JPY) in immediate reaction to unfavorable data from Germany.

Moreover, verbal intervention by Japanese authorities and a risk-off mood amid concerns about continued geopolitical tensions in the Middle East could strengthen a safe-haven currency such as JPY and weigh on EUR/JPY. On the other hand, uncertainty about the BoJ’s next monetary policy move may keep the yen at a relatively feeble level. BOJ Governor Kazuo Ueda said on Monday that the central bank would raise its key interest rate to adjust the degree of monetary easing if economic and price conditions continue to improve.