• EUR/JPY declined following the release of Japan's Gross Domestic Product report on Monday.
• Japan's GDP rose by 0.7% QoQ in Q4, marking the third straight quarter of growth.
• The Euro may gain if a ceasefire in Ukraine is agreed upon and gas supplies resume.

EUR/JPY gives up gains from the previous session, trading around 159.10 during the Asian hours on Monday. This decline is linked to a stronger Japanese Yen (JPY), driven by a robust Japan’s Gross Domestic Product (GDP) report that exceeded expectations, reinforcing market speculation that the Bank of Japan (BoJ) will continue to raise interest rates.

Japan's economy grew by 0.7% in the fourth quarter, compared to the revised 0.4% increase in the previous quarter. This marks the third consecutive quarter of growth, fueled by a strong rebound in business investment. Yearly growth accelerated from a revised 1.7% in Q3 to 2.8%, supporting the BoJ's stance on further rate hikes amid signs of broadening inflation.

Japanese Chief Cabinet Secretary Yoshimasa Hayashi remarked on Monday that Japan faces significant risks if its companies become targets due to US President Donald Trump's policies, and the government will respond cautiously to potential impacts.

The Euro could strengthen against its peers if a ceasefire in Ukraine is reached and gas supplies resume. Reports suggest that Trump and Russian President Vladimir Putin have agreed to start negotiations to end the conflict. BBC sources indicate that Trump administration officials are set to meet with Russian counterparts in Saudi Arabia on Tuesday to discuss a potential peace agreement.

However, any upside for the Euro may be capped as several European Central Bank (ECB) officials remain comfortable with expectations that the central bank will lower its Deposit Facility rate three more times this year. The ECB already reduced interest rates by 25 basis points (bps) to 2.75% last month.