Euro Flat Above 180.00 Versus Soft Yen as German Political Turmoil Offsets Upbeat PMI Data

EUR/JPY traded in a narrow range around 180.255 during the first half of Wednesday's European session, lacking a clear directional bias. The pair showed little reaction to the release of preliminary eurozone PMI data, as market responses to economic figures were offset by political uncertainty in Germany.

**Mixed PMI Data Points to Weak Economic Signals**

The latest preliminary eurozone PMI readings failed to provide sustained support for the euro. According to S&P Global data, Germany's June composite PMI preliminary reading fell to 48.0 from May's 48.8, marking an 18-month low and well below the market consensus of 49.7; the services PMI dropped sharply to 46.8 from 48.1, its lowest level since November 2022. While some eurozone data may have come in better than expected, the clearly weak figures from the bloc's largest economy limited the euro's room to rebound against the yen.

**German Political Turmoil Weighs on Euro Sentiment**

Political uncertainty in Germany has emerged as a key factor suppressing the euro's performance. Reports indicate that far-right party support in eastern Germany has surpassed 35%, with September state elections potentially marking a turning point in the country's post-war political landscape. Economic stagnation is fueling political polarization, which in turn heightens corporate caution, creating a negative feedback loop. In such an environment, the euro struggles to mount a sustained upward move even against a weak yen.

**Yen Weakness Provides Underlying Support**

The yen's broadly soft stance offers underlying support for EUR/JPY, keeping the pair above the 180 handle. However, with the euro lacking independent momentum for strength, coupled with the dual constraints of German political instability and weak economic data, the pair is more likely to remain range-bound in the near term, awaiting clearer directional catalysts. Market sources indicate that investor concerns over the eurozone's economic outlook continue to cap the euro's scope for active appreciation.