EUR/JPY flattens around 163.40, investors seek fresh cues on US-EU trade talks

• EUR/JPY trades sideways around 163.40 as investors seek further development in US-EU trade discussions.
• Soft France CPI data for May paves the way for an interest rate cut by the ECB in June.
• The Japanese Yen capitalizes on a sharp increase in government bond yields.

The EUR/JPY pair trades flat around 163.40 during North American trading hours on Wednesday. The cross consolidates as the Euro (EU) wobbles, with investors looking for fresh cues about the current status of trade talks between the United States (US) and the European Union (EU).

On Tuesday, US President Donald Trump signaled quick attempts from the EU to conduct trade talks with Washington. I have just been informed that the EU has called to quickly establish meeting dates. This is a positive event, and I hope that they will," Trump wrote in a post on Truth.Social.

This comes as a positive trigger for global trade tensions as giant economies have agreed to reach a trade deal. Another reason behind the Euro's sideways performance is anxiety among investors ahead of the inflation data from key nations of the Eurozone, such as Germany, Spain, and Italy on Friday.

Meanwhile, preliminary France Consumer Price Index (CPI) (EU norm) data for May has shown that inflationary pressures have cooled down. Year-on-year CPI rose at a slower pace of 0.6%, compared to a 0.9% growth seen in April. Soft inflation data has encouraged European Central Bank (ECB) officials to support reducing interest rates again in the June policy meeting.

ECB policymaker and French central bank chief François Villeroy de Galhau mentioned in a speech on Tuesday that the 0.6% inflation rate in France is a "very encouraging sign of disinflation in action". Villeroy guided a dovish stance on the interest rate outlook stating that the "policy normalization in the Euro area is probably not complete".

On the Tokyo front, the Japanese Yen (JPY) gains following a significant jump in bond yields. 10-year JGB yields surge by 3% to near 1.52% after Japan's Ministry of Finance signaled that it will consider tweaking the composition of its bond program, which could involve cuts to its super-long bond issuance, Reuters reported.