- EUR/JPY exhibits strength near its all-time high around 176.00 amid weakness in the Japanese Yen.
- The election of fiscal dove Sanae Takaichi as Japan’s Prime Minister has increased the odds of loosening monetary conditions.
- The French economy faces a deeper political crisis after PM Sebastien Lecornu’s sudden resignation.
The EUR/JPY pair demonstrates strength near the all-time high around 176.00 during Tuesday’s late Asian session, posted on Monday. The pair strengthens as the Japanese Yen (JPY) underperforms across the board since Sanae Takaichi has been elected as Prime Minister by Japan’s ruling party.
The Japanese currency has been facing significant pressure as investors factor in Takaichi’s leadership to boost fiscal spending and support loosening monetary policy conditions. This would diminish hopes of more interest rate cuts by the Bank of Japan (BoJ) in the remainder of the year.
A decent upside move in the Japanese Yen was witnessed in the past few weeks amid growing acceptance that the BoJ will remain on its path towards policy normalization, as officials signaled that the trade war risk won’t derail their interest rate hiking plans.
Going forward, the major trigger for the Japanese Yen will be the speech from BoJ Governor Kazuo Ueda on Wednesday. BoJ’s Ueda is expected to provide fresh cues about whether the central bank will stick to its monetary policy tightening plans.
Though investors have underpinned the Euro (EUR) against the Japanese Yen, the former is underperforming its other peers due to the surprise resignation of as France’s prime minister. The shocking resignation of Lecornu after the appointment of the new cabinet has pushed the economy into a deeper political crisis. The impact of the political crisis in France is unfavourable for the Euro (EUR), given that the French economy is the second-largest of the Eurozone in terms of business.
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