• EUR/JPY trades with gains for a second consecutive day near 157.90.
• European PMIs from June came in weak.
• Japan’s Tankan Manufacturing Index improved in Q2. 

The EUR/JPY tallies a consecutive day of gains standing near the 157.90 zone. The European Purchasing Managers' Index (PMI) data for June revealed weakness, contrasting with the improved performance of Japan's Tankan Manufacturing Index in the second quarter released during the Asian session. However, the Yen is still vulnerable on dovish expectations on the BoJ after soft inflation figures were reported last Friday.

European PMIs came in weak, while Japan’s Economic Outlook improved in Q2

The Manufacturing PMI data for June was released for four European countries. In Germany, the HCOB Manufacturing PMI came in at 45.5, slightly below the consensus expectation of 46 and unchanged from the previous reading. Meanwhile, in France, the survey was reported at 41, missing the consensus of 41.6 and showing a decline from the previous figure 40.6. Finally, the index was recorded in Italy at 43.6, in line with the consensus and slightly lower than the previous reading of 43.4, while Spain's figure came in at 48, matching expectations. 

Despite weak PMI figures, the Euro seems to find support in hawkish bets on the European Central Bank (ECB). As indicated by the WIRP (World Interest Rate Probability), it suggests that markets are betting on a strong likelihood of a 25 basis points hike by 90% on July 27 while the odds of another 25 basis points increase to stand at approximately 60% on September 14 meeting.

On the Japanese, the Tankan Large Manufacturing Index for Q2 for Japan came in at 5, surpassing both the consensus of 3 and the previous reading of 1. Additionally, the Tankan Large Manufacturing Outlook for Q2 significantly improved, reaching 9 compared to the consensus of 5 and the previous reading of 3. However, the BoJ may need more evidence of strong economic activity to pivot its dovish monetary policy stance, so monetary policy divergences may continue to weaken the Yen agains most of its rivals