EUR/JPY edges lower as BoJ considers December hike, ECB signals stability

• EUR/JPY edges lower toward 177.50 amid muted market activity on Monday.
• BoJ Governor Ueda leaves the door open for a possible December rate hike but stresses the need for more data.
• Comments from ECB Governing Council members support the idea of a prolonged monetary status quo.

EUR/JPY trades lower on Monday, stabilizing around 177.50 at the time of writing, down 0.10% for the day, as Japanese markets were closed on Monday for a national holiday.

Last week, the Bank of Japan (BoJ) kept rates unchanged, with Governor Kazuo Ueda warning that global trade tensions could weigh on growth and corporate profits. He noted that a rate hike in December remains possible but said more data is needed before adjusting the degree of monetary easing. Investors remain cautious about the timing of any policy tightening, especially as Japan's new Prime Minister, Sanae Takaichi, appears committed to aggressive fiscal spending that could delay monetary normalization.

In the Eurozone, the latest data confirmed a limited improvement in manufacturing activity. The HCOB Manufacturing Purchasing Managers' Index (PMI) stood at 50.0 in October, up from 49.8 in September, signaling a standstill in production. In Germany, the PMI came in at 49.6, while France's rose to 48.8, Italy's to 49.9, and Spain's to 52.1. Although most figures remain below the expansion threshold, they suggest a gradual stabilization in the industrial sector.

On the monetary front, François Villeroy de Galhau, Governor of the Bank of France and European Central Bank (ECB) policymaker, said on Friday that the ECB is "in a good position" after its October decision but emphasized the need to maintain full flexibility amid market risks. His Latvian counterpart, Martins Kazaks, added that risks to inflation and growth are now more balanced, reinforcing the case for keeping current rates unchanged for longer. On Monday, the Governor of the National Bank of Slovakia (NBS), Peter Kazimir, said that there is no need to alter or adjust the monetary policy as risks to inflation and the economy remain broadly balanced.

Against this backdrop, the EUR/JPY pair remains supported by rate differentials and a broadly positive market mood, while uncertainty surrounding the BoJ's next move persists. However, investors remain alert to potential intervention from Japanese authorities should the Yen weaken further.