EUR/JPY maintains its position near 176.50 due to reduced safe-haven demand amid easing trade concerns between the US and China. President Trump expressed that China’s economy would remain unaffected and emphasised a desire to support China rather than harm it.

EUR/JPY recovers from previous losses, trading around 176.50 during Asian hours, as reduced demand for the Japanese Yen results from improving US-China relations. Trump’s remarks on social media included threats of 100% tariffs on Chinese imports, which China warned could prompt retaliatory measures.

Political Factors Impacting the Yen

The Japanese Yen faces potential pressure due to expectations that Japan’s incoming Prime Minister, Sanae Takaichi, will pursue higher fiscal spending and maintain a loose monetary policy. Political tensions are evident as Japan’s Komeito party’s exit from the ruling coalition poses challenges to Takaichi’s leadership and weakens the ruling party’s power.

Political stability in France supports the Euro, as President Macron plans to appoint a new prime minister following Sebastien Lecornu’s resignation. European Central Bank meeting accounts affirmed confidence in the current policy stance’s compatibility with the 2% inflation target, with interest rates deemed sufficient to manage inflation risks.

The Euro strengthens against major currencies, with notable gains against the New Zealand Dollar. A heat map illustrates these percentage changes, highlighting the Euro’s strong position.

We see the EUR/JPY cross continuing its upward trend around the 177.10 mark, building on the sentiment from earlier this month. The reduced demand for the safe-haven yen is a primary driver, as ongoing trade discussions between the US and China appear to be lowering market anxiety. This calm geopolitical environment is making riskier assets more attractive.

Implications for Traders

The Bank of Japan’s policy divergence from other central banks remains the most significant factor for yen weakness. With Japan’s core inflation for the third quarter of 2025 holding at a stubborn 2.3%, the BoJ’s continued commitment to its ultra-loose monetary policy puts sustained downward pressure on the yen. This is a pattern we have seen repeatedly since the global inflation surge of 2022.

For derivative traders, this environment suggests that buying call options on EUR/JPY could be a favorable strategy. Options with November or December 2025 expiry dates and strike prices around 178.00 or 179.00 would allow traders to profit from continued upward movement. The clear policy path from the Bank of Japan provides a strong fundamental reason for this bullish outlook.

On the other side of the pair, the Euro is finding stable ground. The European Central Bank has maintained its stance, supported by recent data showing Eurozone core inflation settled at 2.1% in September 2025, very close to their target. This stability contrasts sharply with the deliberate policy of yen devaluation.

However, we must watch for any renewed political uncertainty out of France. While the situation has calmed, any unexpected developments could quickly dampen enthusiasm for the Euro. Traders might consider using bull call spreads to cap potential losses if French political risk resurfaces.

Looking back, the rapid yen depreciation we witnessed throughout 2023 and 2024 was almost entirely driven by this same policy divergence. The current market setup is a continuation of that theme, where the interest rate differential between the ECB and the BoJ is the dominant force. This historical precedent gives us confidence that the trend is likely to persist in the near term.

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