Germany’s Economic Indicators

Germany’s data shows weak consumer spending. Retail sales dropped by 0.3% in October, while a rise of 0.2% was expected. However, sales are up by 0.9% year-over-year. The Import Price Index fell by 1.4% compared to last year but increased by 0.2% month-over-month. The preliminary HICP for November is expected to rise to 2.4% year-over-year. In Japan, the Consumer Price Index (CPI) in Tokyo rose by 2.7% in November, more than analysts predicted. The core CPI, which excludes fresh food and energy, remained at 2.8%. This indicates ongoing price pressure, suggesting a potential shift in policy. Concerns are growing about Japan’s financial stability due to increased government bond issuance for Prime Minister Takaichi’s stimulus package. Meanwhile, expectations of rate cuts from the U.S. Federal Reserve and hopes for peace in Ukraine are reducing demand for the Japanese Yen as a safe-haven currency. Today, the Euro showed strength against the British Pound among major currencies. However, the EUR/JPY pair is pulling back as mixed economic signals create uncertainty for traders. The Euro faces pressure due to weak consumer spending in Germany, with October retail sales down by 0.3% against earlier predictions of growth. This weakness may limit any potential rise for the Euro, making long positions see risky.

Trade Outlook

On the Japanese side, the strong Tokyo inflation figure of 2.7% supports the Bank of Japan in its gradual move away from its very loose monetary policy. Remember the historic end of negative interest rates in March 2024, marking a significant policy change. This ongoing normalization suggests that the Yen may strengthen, making put options on EUR/JPY potentially valuable. However, Japan’s own fiscal challenges and a broader improvement in market sentiment are capping the Yen’s strength. Concerns about increased bond issuance for stimulus packages create headwinds for the currency. This ongoing push-and-pull means we may see volatility rather than a clear trend. Given these mixed factors, we expect the EUR/JPY to trade within a range in the upcoming weeks. The Eurozone’s economic weakness, evident in 2023 and 2024 with sluggish GDP growth often below 0.5%, will prevent any significant rise in the Euro. Strategies that benefit from sideways movement, like selling strangles, could be useful in this market. External factors are also reducing the Yen’s status as a safe-haven asset, creating a floor under the EUR/JPY pair. Markets currently anticipate that the U.S. Federal Reserve will continue cutting rates into 2026, which boosts global risk appetite. This environment limits the Yen’s allure as a safe haven, unlike during the banking turmoil of 2023. Create your live VT Markets account and start trading now.

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