EUR/JPY edges lower after marking fresh yearly high

• EUR/JPY eases from a fresh yearly high, trading near 172.00 on Wednesday.
• The Japanese Yen gains as the 10-year bond yield jumps to 1.6%, the highest since 2008.
• ECB’s Nagel calls for a “steady hand,” signals no rate change at its next meeting.

The Euro (EUR) is trading slightly lower against the Japanese Yen (JPY) on Wednesday, breaking a three-day winning streak, as the Yen strengthens broadly across major currencies. The Japanese Yen is drawing support from stronger domestic demand for the currency and cautious trading ahead of Japan’s Upper House election scheduled for Sunday, July 20.

At the time of writing, the EUR/JPY cross is easing from a fresh yearly high of 173.25 marked earlier in the day. The pair is trading near 172.00 during the American session, as a modest pullback driven by profit-taking and a broadly stable Yen weighs on the cross.

Adding to the Yen’s support, Japan’s 10-year government bond yield climbed toward 1.6% on Wednesday, its highest level since late 2008. The sharp rise in yields comes amid growing expectations of expanded fiscal spending ahead of the July 20 election, with markets increasingly pricing in the possibility of fresh stimulus measures, including a cut in the consumption tax to support the economy.

Meanwhile, comments from a European Central Bank (ECB) official offered little support for the Euro. ECB policymaker Joachim Nagel struck a cautious tone on Wednesday, calling for a “steady hand” in the face of escalating trade tensions and lingering inflation risks. He signaled that the ECB is likely to keep rates unchanged at its next meeting, reinforcing the view that the central bank is in no rush to adjust monetary policy.

Looking ahead, traders will focus on key economic data later this week, including Eurozone inflation figures due on Thursday and Japan’s Consumer Price Index (CPI) release on Friday, both of which could influence the next move in the EUR/JPY pair.