Euro/yen is expected to rebound from oversold territory next week, with ¥176.77 as the turning point. Pound/yen is expected to trade in a ¥206 range to ¥210.30, with economic developments the key focus.
For next week's outlook for euro/yen and pound/yen, the forecast calls for euro/yen to trade in a ¥175.00–¥179.00 range and pound/yen to trade in a ¥206.00–¥210.30 range. ¥176.77 is identified as the turning point for euro/yen, while support for pound/yen is seen around ¥206.00, with the potential for a rebound or further decline cited as key factors.
In this week's market, euro/yen fell to ¥176.772, while pound/yen declined to ¥206.886 before recovering into the ¥208 range. The diesel issue and concerns over France's fiscal position weighed on the euro, creating periods in which factors pointing to euro weakness acted as a drag.
The outlook for euro/yen was influenced by September euro area HICP, which rose above expectations to 3.8% on a headline basis. The increase was driven mainly by energy, and expectations for an October rate hike did not strengthen, with many market participants expecting the next hike to come in December or later. Developments related to the diesel issue and France's fiscal position are attracting attention as market factors.
For pound/yen, expectations of a BoE rate hike are supporting the downside, while instability in the UK gilt market could act as a drag. Movements in gilt yields and fiscal news are cited as factors that could influence the pound.