EUR/JPY posts fresh lows since the January flash crash
Poor PMI data from France and Germany (in particular the latter) is helping to see the euro slip on the day but also giving the yen a further boost on the session. Germany’s manufacturing sector contracted further at its weakest pace in over 7 years and that is exacerbating calls for the ECB to introduce stimulus as soon as tomorrow.
The OIS market is now pricing in a ~47% probability of the ECB cutting its deposit rate by 10 bps tomorrow, up from ~42% earlier.
As for EUR/JPY, this reaffirms the break seen yesterday as price fell below daily support around 120.78-92 and sellers will now be looking towards the 120.00 handle next.
If you’re wondering about yen gains, the data here essentially continues to dictate that global economic conditions are weakening and slowing down further and that is helping to feed flows into the currency – alongside a move lower in yields after the release.
European bond yields are dragged to fresh two-week lows and in turn is putting a drag on Treasury yields, which are down by nearly 3 bps across the curve now.