Euro holds gains following release of Eurozone Retail Sales data

• EUR/JPY remains stronger after upbeat German factory orders and improving Retail Sales data.
• Eurozone Retail Sales rebounded 0.2% MoM in May, lifting the year-over-year volume up by 1.6% as consumer spending recovered.
• The JPY weakens despite 10-year JGB yields hitting a 30-year high of 2.83%, crushed by surging import costs.

EUR/JPY continues to gain ground for the second successive day, trading around 185.30 during the European hours on Monday. The currency cross remains stronger as the Euro (EUR) holds ground following the release of key economic data from the Eurozone and Germany.

Eurozone Retail Sales rose by 1.6% year-over-year in May, as expected. The previous reading was a 1.0% increase. Meanwhile, monthly growth was 0.2%, against a 0.3% gain, but swinging from a 0.4% decline prior.

Germany's Factory Orders jumped 1.9% in May, faster than the 1.2% estimates. In April, the economic data declined by 3.2%, revised higher from -3.8%. On an annualized basis, Factory Orders surge 6.2% against the previous reading of 2.1%, revised higher from 1.6%.

The EUR/JPY cross advances as the Japanese Yen (JPY) weakens, caught in a high-stakes tug-of-war. Despite 10-year Japanese Government Bond (JGB) yields climbing to a fresh 30-year high of 2.83%, the JPY buckled under the weight of surging import costs. This deep market divergence has put traders on high alert for potential verbal intervention from Tokyo.

Analyzing recent price action, Teppei Ino of MUFG noted that the USD/JPY pair opened near 161.78 and briefly tested 162.84 before reversing. This reversal was fueled by broad US Dollar (USD) weakness following a soft employment report and comments from Fed Chair Kevin Warsh. However, because the Yen remained relatively weak compared to other G10 currencies amid the Dollar sell-off, the EUR/JPY cross maintained its upward momentum.