- EUR/JPY falls as the Euro weakens amid rising risk aversion from US-Iran truce uncertainty.
- Iran fired on three ships in the Strait of Hormuz, escorting two into Iranian waters on Wednesday.
- Traders expect BoJ to hold rates this month, but signal possible policy normalization as early as June.
EUR/JPY remains subdued for the third successive day, trading around 186.60 during the Asian hours on Thursday. The currency cross loses ground as the risk-sensitive Euro (EUR) faces challenges amid increased risk aversion due to ongoing Middle East uncertainty.
The Wall Street Journal reported that Iran fired on three ships in the Strait of Hormuz and escorted two of them into Iranian waters on Wednesday. Iranian media reported that the paramilitary Revolutionary Guard was moving the vessels to Iran, marking a further escalation, although White House press secretary Karoline Leavitt said the seizures did not breach the terms of the ceasefire.
Iran continues to assert control over the Strait of Hormuz, restricting transit and targeting vessels. Iranian parliament speaker and chief negotiator Mohammad Bagher Ghalibaf stated that reopening the strait would be “impossible” while the United States (US) and Israel persist with what he described as “flagrant” ceasefire violations, including the US naval blockade. Meanwhile, President Donald Trump said the current truce would remain in place indefinitely as Washington awaits a renewed peace proposal from Tehran.
The downside of the EUR/JPY cross could be restrained as the Japanese Yen (JPY) loses ground amid higher oil prices, reflecting Japan’s significant reliance on Middle East crude imports. West Texas Intermediate (WTI) rises for the third consecutive day, trading around $93.30 per barrel at the time of writing.
In Japan, focus has turned to next week’s Bank of Japan (BoJ) policy meeting as officials navigate uncertainty from the regional conflict. Traders expect the BoJ to leave interest rates unchanged this month, though it may hint at a potential shift back toward policy normalization as early as June.
