At the start of the trading week, the EUR/JPY currency pair declined to around 163.50, driven by increased selling pressure and rising investor appetite for safe-haven assets. This drop occurred in the context of growing global uncertainty—particularly surrounding the future of U.S.-China trade relations—which has favored safe-haven currencies like the Japanese yen.
Surging Safe-Haven Demand Amid Global Market Uncertainty
During early Monday trading in the European session, the EUR/JPY exchange rate fell to the 163.50 level. Recent remarks by former U.S. President Donald Trump added to the market’s cautious tone, as he stated that China is ready for a trade deal, yet offered no specific details or timeline. He also confirmed that no talks with Chinese President Xi Jinping are scheduled for this week.
This uncertainty prompted investors to shift their capital toward safer assets such as the Japanese yen, boosting its value.
Bank of Japan Policy Decisions and Their Impact on Yen Strength
The Bank of Japan (BoJ) recently kept its benchmark interest rate unchanged at 0.5%. However, the central bank lowered its economic growth forecasts significantly. Growth expectations for the fiscal year ending March 2026 were cut from 1.1% to 0.5%, while projections for the following year dropped from 1.0% to 0.7%.
Although BoJ policies remain accommodative, heightened risk aversion in global markets is driving short-term demand for the yen.
Eurozone Inflation Adds to Market Pressure
On the euro side, the currency has also faced pressure due to unexpectedly high inflation data for April. The faster-than-anticipated rise in prices could complicate the European Central Bank’s (ECB) plans for further interest rate cuts in the coming months.
Later on Monday, the Sentix Investor Confidence Index for the euro area is set to be released, which may provide additional insight into regional economic sentiment.
Conclusion
Rising geopolitical and economic uncertainty, elevated inflation in the eurozone, and reduced growth forecasts in Japan have all contributed to increased volatility in the forex market. In this environment, investors are turning to safe-haven assets like the Japanese yen, causing the EUR/JPY pair to decline. Volatility is expected to remain high in the near term, especially given Japan’s market holiday and upcoming economic data releases.
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