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- EUR/JPY falls as the Euro weakens amid rising risk aversion over uncertainty surrounding a potential Middle East ceasefire.
- US officials say President Donald Trump has directed aides to prepare for a prolonged blockade of Iran.
- JPY remains firm amid BoJ rate-hike expectations and speculation about intervention to limit further currency weakness.
EUR/JPY edges lower after three days of gains, trading around 186.80 during the Asian hours on Wednesday. The currency cross declines as the Euro (EUR) struggles amid heightened risk aversion driven by uncertainty over a potential ceasefire in the Middle East.
The Wall Street Journal reported on Wednesday that US officials said President Donald Trump has instructed aides to prepare for a prolonged blockade of Iran. The report noted that Trump chose to keep pressuring Iran’s economy and oil exports by restricting shipping to and from its ports. Sources added that he viewed alternative options, such as resuming bombing or disengaging from the conflict, as riskier than maintaining the blockade.
Traders turn their attention to the European Central Bank (ECB) interest rate decision on Thursday, where markets expect a “hawkish hold” as policymakers weigh potential rate hikes in June or July. Analysts at Goldman Sachs anticipate two 25 basis point hikes in the coming months, starting in June and followed by another in September, which would lift the deposit rate back to 2.50%.
The EUR/JPY cross remains under pressure as the Japanese Yen (JPY) stays firm amid expectations of a near-term rate hike from the Bank of Japan, alongside speculation that authorities may intervene to curb further yen weakness.
However, the JPY has struggled to attract sustained buying interest despite the BoJ’s hawkish pause on Tuesday. Notably, three of the nine policy board members backed a rate hike, highlighting growing concern over inflation pressures linked to the Iran conflict.
BoJ Governor Kazuo Ueda reaffirmed the central bank’s commitment to gradual policy tightening, signaling that interest rates could continue to rise as economic, price, and financial conditions evolve. Meanwhile, Finance Minister Satsuki Katayama reiterated that authorities stand ready to intervene in currency markets at any time to support the Yen.
