EUR/JPY climbs above 172.00 amid lingering uncertainty over Eurozone inflation

• EUR/JPY continues to appreciate as the Euro receives support after hotter German inflation.
• ECB's Olli Rehn stated that the current uncertainty surrounding inflation trends requires "flexibility" in policymaking.
• The Japanese Yen finds support as traders anticipate the BoJ will raise interest rates before year-end.

EUR/JPY extends its gains for the third successive session, trading around 172.20 during the Asian hours on Monday. The currency cross gains ground as the Euro (EUR) receives support as Friday's data showed that German inflation rate rose to 2.2% in August from 2% in July and above market forecasts of 2.1%, though remaining close to the European Central Bank's (ECB) 2% target.

However, other major economies in the Eurozone reported inflation of 0.8% in France, 1.7% in Italy, and 2.7% in Spain, keeping the ECB on course to maintain rates at 2% in September. Meanwhile, an ECB survey indicated that inflation expectations remain stable.

On Sunday, ECB Governing Council member Olli Rehn stated that current uncertainty over inflation developments calls for "flexibility" in policymaking. Rehn added, "There are more downside risks to inflation stemming from a stronger Euro (EUR), cheaper energy and easing of core inflation, together with the damage trade policy has caused to the global economy." "Rate decisions are taken meeting by meeting, based on the latest available data," according to a Bloomberg report.

The upside of the EUR/JPY cross could be restrained as the Japanese Yen (JPY) receives support as traders expect the Bank of Japan (BoJ) to increase interest rates before year-end, which could be attributed to the rising wages, stubborn inflation, and a more optimistic economic outlook.

On the data front, Japan's Capital Spending rose 7.6% in the second quarter, accelerating from 6.4% in the prior quarter and surpassing forecasts of 6.2%. However, the Jibun Bank Manufacturing Purchasing Managers Index (PMI) was revised down to 49.7 from 49.9, marking the 13th contraction in factory activity in the past 14 months.