EUR/JPY rebounds after dip to one-month low

• EUR/JPY rebounds to 173.00 after dipping to its lowest level since September 9.
• Political uncertainty weighs on the Yen ahead of the LDP leadership election on Saturday.
• The common currency struggles to extend gains despite a softer Yen due to weak Eurozone data.

The Euro (EUR) gains traction against the Japanese Yen (JPY) on Friday, recovering after briefly slipping to its lowest level since September 9 on Thursday. At the time of writing, EUR/JPY trades near 173.00, staging a modest rebound from recent lows.

The Japanese Yen (JPY) remains broadly under pressure against major peers, weighed down by political uncertainty as the ruling Liberal Democratic Party (LDP) prepares to elect its new leader this weekend, a contest that will effectively determine the country's next prime minister. Meanwhile, Japan's August Unemployment Rate rose to 2.6%, above the forecast 2.4% and up from 2.3% in July, reinforcing the view of a cooling labour market and further undermining the Yen's appeal.

However, the Euro's (EUR) advance has been limited by lacklustre Eurozone data. The HCOB Composite Purchasing Managers Index (PMI) for September held steady at 51.2, in line with expectations, while the Services PMI slipped to 51.3, missing the 51.4 forecast.

Additionally, August's Producer Price Index (PPI) fell 0.3% MoM, compared with expectations for a 0.1% decline and down from a 0.3% increase in July, while the annual PPI eased to -0.6% YoY, below the forecast for a 0.4% decrease and sharply lower than the 0.2% gain recorded in the previous month. The weaker data offered little support to the common currency, leaving it struggling to extend gains despite the Yen's broader weakness.

Meanwhile, Bank of Japan (BoJ) Governor Kazuo Ueda struck a cautiously hawkish tone in a speech on Friday, reiterating that the central bank stands ready to raise interest rates if the economic and inflation outlook warrant it. Ueda also highlighted global uncertainties, including softer US labour market trends and tariff-related headwinds, which could weigh on corporate wage growth and keep the timing of any further policy moves uncertain.