EUR/JPY holds below the 159.00 mark ahead of the German IFO data

• EUR/JPY hovers around 158.80 ahead of the key events from both the Eurozone and Japan.
• Eurozone economic data on Tuesday revealed a contraction in PMI and lower inflation in October.
• Japan's government is considering spending approximately $33 billion on handouts to low-income households.
• The European Central Bank (ECB) rate decision and Japanese inflation data will be in the spotlight this week.

The EUR/JPY cross posts modest gains after bouncing off the previous day’s low of 158.53 during the early European session on Wednesday. The cross currently trades around 158.80, gaining 0.03% for the day. That being said, the downbeat Eurozone economic data is one of the factors that exert pressure on the Euro (EUR) against the Japanese Yen (JPY).

On Tuesday, Eurozone economic data revealed a contraction in PMI and lower inflation in October. These reports support the anticipation that the European Central Bank (ECB) will maintain interest rates unchanged on Thursday.

The preliminary Composite PMI for the eurozone fell to 46.5 in October from 47.2 in September. It was the sixth consecutive reading below 50, indicating an ongoing downturn. Meanwhile, the Manufacturing PMI dropped to 43.0 from 43.4 in the previous reading, which was below the consensus estimate of 43.7. The Services PMI declined from 48.7 versus 47.8 prior. The Euro faced some selling pressure due to the discouraged Eurozone data which acts as a headwind for the pair.

European Central Bank policymaker Gabriel Makhlouf said on Tuesday that the central bank will monitor the unfolding crisis in the Middle East while mentioning that it was too early to assess the impact on economies.

On the JPY’s front, Japan's government is considering spending approximately $33 billion on handouts to low-income households and an income tax cut in a package of steps to help people from growing rising expenses, per Reuters. Investors await Japan’s Tokyo Consumer Price Index for October for fresh impetus.

Apart from this, the economic data released on Tuesday revealed that the Japanese Jibun Bank Manufacturing PMI for October eased to 48.5 versus 48.5 prior, below the market consensus of 48.9 whereas the Services PMI came in at 51.1 from 53.8 in the previous reading.

Looking ahead, traders will monitor the German IFO data and ECB’s President Lagarde's speech on Wednesday. The highlight this week will be the ECB rate decision on Thursday and the release of Japanese inflation data on Friday. Traders will take cues from these events and find trading opportunities around the EUR/JPY cross.