- The EUR/JPY could be even more appreciated in the midst of improving the feeling of global risk after Trump’s announcement about softer tariffs on Chinese imports.
- The German Foreign Minister Friedrich Merz warned: “President Trump’s policies are increasing the probability of a financial crisis earlier than expected.”
- The earnings in the currency pair could be limited since the Japanese yen continues to benefit from the demand for shelter assets.
The EUR/JPY experiences volatility during the European hours of Monday, quoting near the 163.00 mark. The euro finds support as the improved feeling of global risk promotes the demand for risk -sensitive assets. This optimism followed the announcement of US President Donald Trump Sunday night about less severe tariffs on Chinese imports, including semiconductors and electronics.
However, Trump clarified that previously speculative exemptions will not be granted. The affected goods will continue to face the existing tariffs of 20% related to the fentanyl instead of the much higher tariffs of 145% that had previously been suggested.
Meanwhile, German Foreign Minister Friedrich Merz expressed concern about Trump’s economic strategy in an interview with Handelsblatt on Saturday. “President Trump’s policies are increasing the risk that the next financial crisis arrives earlier than expected,” he warned. Merz also advocated a new transatlantic commercial pact, proposing “zero percent tariffs in everything, that would be better for both parties.”
Despite the earnings of the euro, the bullish potential for the EUR/JPY crossing can be limited. The Japanese Yen continues to receive support from the safe refuge flows amid persistent concerns about commercial tensions between the US and China. In addition, optimism around a possible commercial agreement between the US and Japan, together with the expectations that the Bank of Japan (BOJ) can continue to harden the policy in 2025 due to the growing inflationary pressures, further supports the Yen.
Japanese Prime Minister Shigeru ishiba reiterated these concerns on Monday, warning that US tariff actions could destabilize the global economic order. Going to Parliament, Ishiba declared: “I am fully aware that what has happened so far has the potential to interrupt the global economic order,” while reaffirming Japan’s commitment to cooperate with Washington in commerce and security.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
