Forex Market: EUR/JPY edges higher following upbeat French PMI data

The euro snapped two day of losses against the Japanese yen, after preliminary data showed manufacturing activity in the second-largest euro zone economy, France, expanded at the fastest pace in almost three years in March, boosting demand for the 18-nation common currency.

EUR/JPY hit a session high at 141.88 at 08:10 GMT, after which the pair trimmed some losses to trade consolidate at 141.53, adding 0.32% for the day. Support was likely to be received at March 21st low, 140.44, while resistance was to be met at March 20th high, 141.73.

The market research group Markit Economics reported today that its French preliminary PMI rose to 51.9 this month from a final reading of 49.7 in February and compared to median analysts estimates of 49.7. If confirmed, this will be the fastest pace of expansion in French manufacturing activity since June 2011.

In addition, the French preliminary services PMI jumped to a two-year high of 51.4 this month from a final reading of 47.2 and compared with experts forecasts of an increase to 47.5.

A value above the key level of 50.0 is indicative of expansion in the sector, while a reading below 50.0 is indicative of contraction in the activity of the sector.

Meanwhile, yens demand was pressured amid speculation the Bank of Japan will add to unprecedented stimulus to reduce the impact of a sales-tax increase next week.

BoJs Deputy Governor Kikuo Iwata said at a forum on monetary policy today, cited by Bloomberg, that deflation is the biggest problem for the Japanese economy and the main reason for the strength of the yen. Earlier this month, he said that the central bank is ready to adjust its monetary policy, should the 2% inflation target be deemed impossible to achieve.

The BoJ started the unprecedented stimulus program in April 2013, pledging it will achieve 2% inflation target around two years through aggressive asset purchase in an attempt to end 15 years of deflation.

Twelve of 34 economists in a Bloomberg survey, conducted on February 25 to March 4, predicted the BoJ will add to stimulus as early as next month, when the government raises the sales tax form 5% to 8%.