EUR/JPY tumbles to near 172.50 as Japanese Yen outperforms across the board

• EUR/JPY falls sharply to near 172.50 as the Japanese Yen continues to outperform its peers.
• The US government shutdown has increased the safe-haven demand for the Japanese Yen.
• The Eurozone headline HICP grew at a faster pace of 2.2% in September.

The EUR/JPY pair trades 0.6% lower to near 172.50 during the European trading session on Wednesday. The cross faces a sharp selling pressure as the Japanese Yen (JPY) continues to outperform its peers from the past few trading days.

The Japanese Yen trades firmly as its safe-haven demand has increased amid the United States (US) government shutdown. Washington entered a partial closure on Tuesday midnight after Democrats refused to approve the short-term funding bill in the House of Senate.

Another reason behind the strength in the Japanese Yen is the growing acceptance that the Bank of Japan (BoJ) could raise interest rates further in the remainder of the year. BoJ officials have been reiterating that the central bank will raise interest rates if the economy continues to perform as anticipated.

Meanwhile, the Euro (EUR) trades lower after the release of the preliminary Eurozone inflation data for September. As measured by Harmonized Index of Consumer Prices (HICP), price pressures accelerated at an annual pace of 2.2%, faster than 2% in August. Meanwhile, the core HICP - which excludes volatile items - rose steadily 2.3%. Monthly inflation eased to 0.1%, from 0.3% in the previous month, while the core HICP remained steady at 0.1%.

The inflation data remaining above the European Central Bank's (ECB) 2% target would allow officials to avoid making any adjustment in monetary policy rates.