EUR/JPY extends recovery above 168.00 on upbeat Eurozone data

• EUR/JPY recovers sharply above 168.00 amid fresh concerns over ECB rate cuts from June.
• The Eurozone inflation rose higher than estimates, and Q1 GDP outperformed expectations.
• The Japanese Yen edges down but holds significant gains reported on Monday.

The EUR/JPY pair recovers further above the crucial resistance of 168.00 in Tuesday’s European session. The cross rises 0.36% after the Eurostat reported that strong preliminary Consumer Price Index (CPI) for April and Q1 Gross Domestic Product (GDP) data.

The agency showed that annual Harmonized Index of Consumer Prices (HICP) rose by 2.4%, remained in line with estimates and the prior reading. The core CPI that strips of volatile food and energy prices grew higher by 2.7% from the consensus of 2.6%.

Meanwhile, the GDP growth in the first quarter was 0.3%, significantly higher from the estimates of 0.1%. The economy remains stagnant in the last quarter of 2023. Sticky inflation combined with robust growth has raised concerns over European Central Bank (ECB) plans of announcing an end to the restrictive monetary policy framework.

The speculation for the ECB pivoting to rate cuts in the June meeting was firm due to consistently declining price pressures. Also, majority of ECB policymakers were comfortable with rate-cut expectations for June while they were divided over whether the rate cut cycle should continue straight after June meeting.

On the Tokyo front, the Japanese Yen has come down slightly against all major currencies after rallying on Monday. Financial markets anticipated that the upside move in the Japanese Yen was the outcome of Japan’s probable intervention. However, Japan’s top currency diplomat didn't confirm any FX intervention in his speech in the European session. Kanda said, "Speculative, rapid and abnormal FX moves have had a bad impact on the economy, so are unacceptable.". Kanda refrained from providing an appropriate level when asked about what could be the probable zone where the administration could intervene if authorities have not stepped yet.