- EUR/JPY becomes around 161.85 in an early European session.
- In March, CPI inflation in Japan increased by 3.6% in March.
- The EBC indicator reduced the rate by 25 BPS to 2.25% at the April meeting on Thursday.
EUR/JPy Cross trades near 161.85 during the early European session on Friday. The trade war of US President Donald Trump remains a source of deep uncertainty. However, on Thursday, Trump proposed encouraging signals that negotiations with other countries can lead to lower tariffs. Optimism related to commercial talks can undermine secure currencies, such as Japanese Jen (JPY).
The national consumer price rate (CPI) increased by 3.6% in March, which means three basic years that the inflation header is above 2% of the target Bank of Japan (BOJ), as revealed by Japan Statistics Bureau on Friday. This number was lower than 3.7% registered in February.
Meanwhile, the so -called “basic” inflation rate, which sets the prices of both fresh food and energy, increased in March to 2.9% from 2.6% in February. Basic inflation, which throws out the prices of fresh food, increased in March to 3.2% from the previous reading 3.0%. The number was in line with the market consensus.
The data is ahead of the BOJ political meeting on May 1. It is expected that the boat will maintain interest rates of 0.5% and reduce growth estimates because Trump’s steep tariffs cloud cover economic perspectives. Traders also strictly monitor the development of commercial negotiations specific to the country.
On the euro front, the European Central Bank (EBC) reduced the main interest rate by a quarter of the percentage point to 2.25% at the April meeting on Thursday, citing growing commercial voltages after Trump’s tariffs caused a global trading war. President EBC Christine Lagarde said during a press conference that the US tariffs for EU goods, which increased from an average of 3% to 13%, already harm the perspectives of the European economy.
The pigeon position from the ECB may weigh a common currency against JPA. “He has a dove. He focused on looking at the risk of decline in the scope of growth prospects, not the risk of inflation,” said Kirstine Kundby-Nielsen, an FX analyst from Danske Bank.
Frequently asked inflation questions
Inflation measures the escalate in the price of a representative basket of goods and services. Header inflation is usually expressed as a percentage change based on month to month (Mom) and year on year (Yoy). Basic inflation excludes more unstable elements such as food and fuel, which can change because of geopolitical and seasonal factors. Basic inflation is the number of economists focus on the level of central banks, which are authorized to maintain inflation at a management level, usually about 2%.
The consumer price indicator (CPI) measures the change in the prices of the basket of goods and services over time. This is usually expressed as a percentage change on the basis of month to month (Mom) and year on year (Yoy). Core CPI is a number directed by central banks because it excludes unstable food and fuel cartridges. When Core CPI increases above 2%, it usually causes higher interest rates and vice versa when it drops below 2%. Because higher interest rates are positive for currency, higher inflation usually causes a stronger currency. On the contrary, it is true when inflation falls.
Although this may seem contrary to intuition, high inflation in the country increases the value of its currency and vice versa for lower inflation. This is due to the fact that the central bank usually raises interest rates to combat higher inflation, which attracts more global influx of capital than investors looking for a lucrative place to park their money.
Earlier, gold was investors of assets, to which he turned to high inflation, because it retained its value, and although investors often buy gold for his secure real estate in times of extreme market riots, this is not the most of the time. This is because when inflation is high, central banks set interest rates to combat it. Higher interest rates are negative in the case of gold because they escalate the costs of having gold in relation to assets on interest or place money on the cash deposit account. On the other hand, lower inflation is positive for gold because it lowers interest rates, thanks to which glowing metal is a more profitable investment alternative.
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