EUR/JPY weakens to near 161.65 in Tuesday’s Asian session, losing 0.33% on the day.
The rising safe-haven demands support the Japanese Yen.
The preliminary reading of the April HCOB PMI from the Eurozone, Germany will take center stage on Wednesday.
The EUR/JPY cross attracts some sellers to around 161.65 during the early European session on Tuesday. The Japanese Yen (JPY) strengthens against the Euro (EUR) amid concerns over US President Donald Trump's tariffs and the escalating US-China trade war.
Persistent trade-related uncertainties triggered by Trump and his fresh attack on Federal Reserve (Fed) Chair Jerome Powell rattled markets. This, in turn, boosts the safe-haven flows, benefiting the JPY in the near term. White House economic adviser Kevin Hassett said on Friday that Trump and his administration were continuing to study whether they could fire the Fed’s Powell.
Additionally, the rising bets that the Bank of Japan (BoJ) will continue raising interest rates might contribute to the JPY’s upside and act as a headwind for EUR/JPY. BoJ Governor Kazuo Ueda said last week that Japan's real interest rates remain very low and that the BoJ is expected to keep raising interest rates if the economy and prices move in line with projections. The view was further echoed by BoJ board member Junko Nagakawa.
On the Euro front, the dovish stance of the European Central Bank (ECB) might weigh on the shared currency. The ECB decided to cut its main interest rate by a quarter of a percentage point to 2.25% at its April meeting last week. During the press conference, ECB President Christine Lagarde said that US tariffs on EU goods, which had increased from an average of 3% to 13%, were already harming the outlook for the European economy.
Investors will keep an eye on the preliminary reading of the HCOB Purchasing Managers Index (PMI) from the Eurozone and Germany for April, which is due later on Wednesday. If the reports show a stronger-than-expected outcome, this could help limit the EUR’s losses.
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