• The Euro bounces back against the Japanese Yen after the flash German and Eurozone Q2 data release.
• Eurozone GDP turns positive in Q2, growing strongly by 0.4%.
• Traders are confident that the BoJ will leave interest rates unchanged on Friday.

The Euro (EUR) claws back its early losses and turns almost flat against the Japanese Yen (JPY) after the release of preliminary German Q2 Gross Domestic Product (GDP) and inflation data for its six states.

In the European session on Thursday, EUR/JPY turns flat at around 187.35.

The data shows that the economy expanded 0.2% Quarter-on-Quarter (QoQ) against 0.1% estimates. In the first quarter of the year, the GDP growth was 0.3%. On an annualized basis, the GDP growth remained stronger at 0.9% vs. 0.6% estimates and the prior release of 0.4%.

Meanwhile, the inflation data in all six states of Germany remained stronger in July, staging a strong ground for the flash German Harmonized Index of Consumer Prices (HICP) data, which will be published at 12:00 GMT.

Eurozone Q2 GDP data seems stronger than that of Germany. Old Continent's GDP returns to growth after declining 0.2% in the first quarter of the year. The GDP growth remained stronger at 0.4% vs. estimates of 0.2%

Signs of inflationary pressures accelerating in Germany will likely boost expectations of more interest rate hikes by the European Central Bank (ECB) this year.

On the JPY front, investors await the Tokyo Consumer Price Index (CPI) data for July and the Bank of Japan's (BoJ) monetary policy announcement on Friday. Tokyo CPI ex. Fresh Food is expected to arrive higher at 1.7% Year-on-Year (YoY) from 1.6% in June.

BoJ decision seen as a foregone conclusion, with focus shifting to policy outlook

Analysts at Commerzbank expect the Bank of Japan to deliver no surprises on the policy rate at its meeting early Friday, noting that the central bank "will leave its overnight call rate unchanged." They highlight that this outcome is already fully discounted, with "the market...pricing this in at 99.3%, and all analysts surveyed by Bloomberg agree." As a result, Commerzbank stresses that "that won’t be the deciding factor," arguing instead that "the outlook will be much more important" for markets as investors scrutinize the BoJ’s guidance for any shift in tone or timing on future moves.