- EUR/JPY loses ground to around 182.95 in Monday’s early European session.
- Geopolitical risks in the Middle East could boost the Japanese Yen, a safe-haven currency.
- BoJ is likely to hold off on raising interest rates until June or July.
The EUR/JPY cross trades in negative territory near 182.95 during the early European session on Monday. The Japanese Yen (JPY) edges higher against the Euro (EUR) on escalating conflict in the Middle East. The German January Industrial Production data is due later on Monday. On Tuesday, the attention will shift to Japan’s Q4 Gross Domestic Product report.
The US-Israeli war with Iran has entered its 10th day. Iran named Mojtaba Khamenei, the second son of the late Ayatollah Ali Khamenei, as the new Supreme Leader. He succeeds his father, Ayatollah Ali Khamenei, who was killed in the initial wave of US-Israeli strikes.
US President Donald Trump demanded Iran’s “unconditional surrender” and indicated he expects a role in selecting a leader “acceptable” to the White House. Iran has launched missiles and drones at Israel and several Gulf states in the past days, including Saudi Arabia, the UAE, Kuwait, and Bahrain. Rising tensions in the Middle East could provide some support to the JPY and act as a headwind for the cross in the near term.
On the other hand, uncertainty surrounding the Bank of Japan (BoJ) interest rate path might cap the upside for the JPY. BoJ Governor Kazuo Ueda last week signaled a likely prolonged hold on interest rates due to the potential economic impact of the Middle East conflict. While some analysts expected a BoJ March hike, many now anticipate the Japanese Yen central bank to stand pat until at least April or July, according to Reuters.
