EUR/JPY hovers around 156.00 ahead of Eurozone PMI data

• EUR/JPY holds positive ground around 156.06 on Tuesday.
• After European inflation fell to 2.4% in November, traders increased their expectations of rate cuts in 2024.
• The anticipation that the Bank of Japan (BoJ) will exit its ultra-loose policy by the first half of 2024 might limit JPY’s downside.
• Investors await the Eurozone HCOB Manufacturing PMI for December.

The EUR/JPY cross snaps the two-losing streak during the early European session on Tuesday. However, the bearish outlook of the EUR/JPY remains intact as the cross holds below the key Exponential Moving Average (EMA) on the daily chart. The cross currently trades near 156.06, up 0.16% for the day.

The falling inflation might prompt the European Central Bank (ECB) to begin cutting interest rates in the second quarter of 2024. Traders raise their bets on a rate cut after eurozone inflation fell to 2.4% in November, from its peak above 10% a year earlier and just marginally over the ECB's target of 2%.

On the Japanese Yen front, the anticipation that the Bank of Japan (BoJ) will exit its ultra-loose policy by the first half of 2024 might cap the downside of the JPY and act as a tailwind for the EUR/JPY cross. The BoJ governor Kazuo Ueda said during the press conference on December 19 that policymakers will track more information to see if a virtuous cycle of wage and price is achievable to determine whether the central bank will normalize policy.

Looking ahead, traders will focus on the Eurozone HCOB Manufacturing PMI for December. Later this week, the German Unemployment report will be due on Wednesday. The Japanese Jibun Bank Manufacturing PMI, the German Consumer Price Index (CPI) will be released on Thursday.