EUR/JPY better bid on trade-deal hopes/intermarket correlations

• EUR/JPY bulls in charge as trade deal optimism is building.
• Eurozone data and economic performance remains a thorn in the euro’s side.  

EUR/JPY was trading higher into the close on Wall Street, adding some 0.25% on the day having travelled from a low of 119.65 to a high of 120.11. Risk appetite  was elevated  at the start of the week following positive and upbeat trade deal headlines that suggest a so-called “Phase-One” deal was in the making a scheduled to be inked  between the  two largest  economies of the world to turn a corner in what has been a 16-month trade dispute to date.  

EUR/JPY rides the waves of correlated bid markets

There were weekend reports that China is planning to lift penalties on intellectual property violations which have bolstered trade optimism and saw both European and US equities higher, with Wall Street benchmarks setting new record highs.  At the time of writing, just ahead of the close, the S&P 500 was up 0.70% and the DJIA up 0.61%. In Europe, the DAX was up 0.6% and the FTSE 100 rallied 0.9% despite a bid in the GBP. Indeed, EUR/JPY is correlated to performances  in glocal stocks.

German IFO index dents the euro

However, on a slightly more soured note, the November German IFO index showed business conditions consolidating around their lows: “Expectations failed to mirror the optimism amongst investors in the ZEW survey, with IFO expectations lifting only modestly to 92.1 (last: 91.6). The assessment of current conditions was stable at 97.9 (last: 97.8),”  analysts at ANZ Bank explained. , adding, “The flat-lining in the data might indicate that business conditions are bottoming out, but there is no evidence of a dynamic upswing. The pressure to re-balance policy in the EA appears set continue.”    

The end result was a wright on the euro as growth prospects in the eurozone and a dovish remains a thorn in its side.  In the New York session, such sentiment was echoed by ECB’s chief economist  Kane who stated that  quantitative easing, (QE), was here to stay, “far into the future” and that the  ECB will be in the bond market for “a long time”.  

EUR/JPY levels