EUR/JPY holds ground near 162.50 following key economic data from Germany
- EUR/JPY remains stable after data showed the German economy expanded by 0.2% QoQ in Q1.
- German Retail Sales rose 2.2% year-over-year in March, easing from a 4.3% increase in February.
- Japan’s Retail Sales climbed 3.1% YoY in March, marking the 36th consecutive month of growth.
EUR/JPY halts its two-day losing streak, trading around 162.40 during the European session on Wednesday. The currency cross holds ground following the release of key economic data from Germany.
The preliminary data from Destatis showed Germany’s economy grew 0.2% quarter-over-quarter in Q1 2025, in line with expectations, following a 0.2% contraction in Q4 2024. However, the annual GDP declined by 0.2%, matching the previous quarter’s reading and market forecasts.
Germany’s Retail Sales increased 2.2% year-over-year in March, slowing from February’s 4.3% rise. The seasonally adjusted unemployment rate held steady at 6.3% in April—its highest since September 2020—meeting expectations. Traders now turn their attention to the upcoming releases of Germany’s CPI and the Eurozone GDP later in the day.
The EUR/JPY cross finds support as the Japanese Yen (JPY) continues to weaken, pressured by disappointing domestic economic data. Japan’s industrial production fell 1.1% month-over-month in March, reversing February’s 2.3% gain and missing expectations of a 0.4% decline. This marks the second monthly contraction in 2025, raising concerns over the economic impact of potential US tariffs.
Japan’s Retail Sales rose 3.1% year-over-year in March, slightly below the forecast of 3.5%, but extended expansion streak to 36 consecutive months. Despite support from rising wages, the slower pace suggests emerging headwinds to consumer spending.
Additionally, the Japanese Yen remains under pressure amid reduced demand for safe-haven assets, as optimism over US-China trade relations grows. US President Donald Trump signaled readiness to ease tariffs on Chinese goods, while Beijing offered exemptions for select US imports previously hit with high duties.
German economy FAQs
The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany's economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany's economy strengthens, it can bolster the Euro's value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro's strength and perception in global markets.
Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the 'Fiscal Compact' following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.
Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.
German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond's price, and it is therefore considered a more accurate reflection of return. A decline in the bund's price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.
The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).
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