Euro flattens against the Japanese Yen in countdown to Eurozone HICP data

The Euro (EUR) settled at 177.60 against the Japanese Yen (JPY) in the Asian trading session on Friday, edging close to the 10-month low of 176.66 observed the previous day. The Japanese currency demonstrated strength on Friday, with the Tokyo Consumer Price Index (CPI) data for September proving stronger than anticipated. This bolstered expectations of additional interest rate hikes by the Bank of Japan (BoJ) in the near term.

Japanese Yen outperformed against major currencies, including the US Dollar, showcasing its strength in the forex market. The latest figures reveal that Tokyo CPI ex. Fresh Food rose to 2.7% year-on-year (YoY), surpassing estimates and the prior reading of 1.8%. Inflation accelerated from 1.9% in August to 2.7%. During the BoJ's policy meeting on Thursday, certain policymakers advocated for further tightening of monetary conditions, emphasizing the need to anchor underlying inflation near 2%.

Meanwhile, the Euro faces uncertainty as soaring French government bond yields due to increasing public debt may raise fiscal concerns. France's public debt has reached 119% of Gross Domestic Product (GDP), resulting in 10-year France bond yields reaching 4.96%, the highest level since August 2002. In response, Finance Minister Roland Lescure pledged to restore public finances for budget consolidation, aiming to bring the budget deficit down from a target of 5% of economic output next year to the EU limit of 3% by 2029.

Investors are awaiting Eurozone preliminary Harmonized Index of Consumer Prices (HICP) data for September, scheduled for release at 09:00 GMT. This index, published by Japan's Statistics Bureau monthly, gauges price fluctuations in household goods and services in the Tokyo region, excluding fresh food. It serves as a leading indicator of Japan’s overall CPI, as it is released weeks before the comprehensive nationwide reading.

A high reading is typically viewed as favorable for the Japanese Yen (JPY), while a low reading is perceived as unfavorable.