- EUR/JPY rises as risk aversion eases after reports US Energy Secretary Chris Wright expects the Iran war to end within weeks.
- Rising oil prices highlighted Europe’s vulnerability to higher energy costs and potential trade balance deterioration.
- Traders expect that Japanese authorities may intervene in the foreign exchange market to curb the JPY’s weakness.
EUR/JPY gains ground after two days of losses, trading around 182.60 during the Asian hours on Monday. The currency cross advances as the Euro (EUR) gains support against its peers after The Guardian reported that US Energy Secretary Chris Wright expects the US-Israel conflict with Iran to end within “the next few weeks,” potentially allowing oil supplies to recover and energy prices to ease.
However, the EUR/JPY cross’s upside may remain limited as the Euro continues to face pressure from rising oil prices, underscoring Europe’s vulnerability to higher energy costs that could weigh on the region’s trade balance. The recent surge in energy prices has led money markets to price in two European Central Bank rate hikes this year, a sharp shift from last month, when no policy moves were anticipated.
French President Emmanuel Macron said on Sunday that freedom of navigation through the Strait of Hormuz must be restored as soon as possible. Macron also urged Iran’s president to immediately halt what he described as unacceptable attacks against countries in the region, including Lebanon and Iraq.
Traders are now focusing on the ECB’s upcoming policy meeting, where President Christine Lagarde is expected to outline how the central bank intends to address inflationary pressures linked to the conflict.
Meanwhile, the EUR/JPY cross could face additional headwinds as the Japanese Yen (JPY) finds support on expectations of potential foreign exchange intervention by Japanese authorities. Finance Minister Satsuki Katayama said the government is closely monitoring currency movements and stands ready to take strong action if necessary.
