The EURJPY currency pair fell sharply to near 159.00 in European trading hours on Monday, facing sharp selling pressure as the Japanese Yen outperforms across the board amid dismal market sentiment.
Deepening doubts over the US economic outlook under the Trump administration has increased the safe-haven appeal of assets, such as the Yen and Swiss Franc (CHF).
Meanwhile, the US Dollar is facing strong selling pressure as signs of a slowdown in the American economy have prompted Federal Reserve dovish bets.
Apart from the safe-haven demand, firm expectations that the Bank of Japan will raise interest rates again this year could reduce rate differentials of the BoJ against other major central banks.
Meanwhile, the Euro is underperforming at the start of the week, except the US Dollar, as investors start digesting German debt reforms.
Last week, German leaders agreed to stretch the borrowing limit or so-called “debt brake” to boost defense spending and stimulate economic growth. Investors expect German debt reforms would boost inflation in the Eurozone.
On Thursday, European Central Bank President Christine Lagarde refrained from guiding the impact of German debt restructuring on the monetary policy and the inflation outlook.
Lagarde said in the press conference after the policy decision that the increased defense and infrastructure spending is still a “work in progress” and the ECB “needs time” to understand the impact.
(Source: OANDA)