The EUR/JPY currency pair edged lower to around 161.65 during early European trading on Tuesday, as the Japanese Yen (JPY) gained traction against the Euro (EUR) amid growing global uncertainty fueled by U.S. trade policy tensions.
Concerns surrounding U.S. President Donald Trump’s tariff threats and renewed hostilities in the U.S.-China trade conflict have spurred a flight to safety, bolstering demand for the JPY. Market jitters intensified following Trump’s fresh criticism of Federal Reserve Chair Jerome Powell, prompting speculation about his possible removal—an idea White House economic adviser Kevin Hassett confirmed is under consideration.
Further supporting the Yen, expectations are rising that the Bank of Japan (BoJ) will continue its path of monetary tightening. BoJ Governor Kazuo Ueda recently reaffirmed that Japan’s real interest rates remain low and signaled more rate hikes could follow if economic conditions evolve as projected. BoJ board member Junko Nagakawa echoed this sentiment, reinforcing the central bank‘s hawkish tone.
In contrast, the Euro faces pressure from the European Central Bank’s (ECB) dovish policy stance. At its April meeting, the ECB lowered its key interest rate by 25 basis points to 2.25%. ECB President Christine Lagarde warned that recent U.S. tariff hikes on European Union goods—from 3% to 13%—are already negatively impacting the region’s economic outlook.
Looking ahead, investors will closely watch Wednesday’s release of the preliminary HCOB Purchasing Managers Index (PMI) data for April from Germany and the broader Eurozone. A stronger-than-expected reading could offer temporary relief for the EUR, potentially capping further losses in the EUR/JPY pair.
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