Euro holds gains against Japanese Yen as Germany’s Trade Surplus widens in May

• EUR/JPY maintains its upward momentum following stronger-than-expected trade data from Germany.
• Germany's May trade surplus widened to €19.1 billion, as exports grew 0.9% while imports fell 2.5%.
• The Japanese Yen could gain support from mounting speculation of official foreign exchange market intervention by Japanese authorities.

EUR/JPY extends its gains for the second successive day, trading around 185.70 during the early European hours on Thursday. The currency cross maintains its upward momentum following stronger-than-expected seasonally-adjusted Trade Balance data from Germany.

Germany's Trade Surplus widened to €19.1 billion in May, marking the largest surplus since February. This comfortably beat market forecasts of €14.8 billion and followed an upwardly revised €14.7 billion surplus in April. This expansion was driven by an unexpected 0.9% month-on-month surge in German exports, which hit a three-and-a-half-year high and defied expectations of a 0.3% decline. Conversely, imports dropped by 2.5% to a three-month low, missing the estimate for a 0.1% growth and reversing the previous month's 1.1% gain.

However, the upside of the EUR/JPY cross could be limited as the Japanese Yen (JPY) could receive support from mounting speculation that Japanese authorities might intervene in the foreign exchange market. Michael Nizard, head of multi-asset and overlay at Edmond de Rothschild Asset Management, noted that the yen's current weakness is excessive and fails to reflect the strong fundamentals of the Japanese economy. He warned that this stark misalignment could ultimately prompt major central banks to launch a coordinated market intervention.

Supporting the narrative of economic resilience, the Bank of Japan’s (BoJ) latest quarterly report left its overall assessment unchanged, viewing most of its nine regional economies as "recovering moderately." The report highlighted that many regions saw firms, including smaller enterprises, deliver substantial wage hikes this year, though some businesses warned that this rising pay may be difficult to sustain. Additionally, companies are maintaining price increases to cover escalating labor and distribution expenses, with multiple regions reporting that firms are considering further price hikes for food and daily essentials starting this summer.