EUR/JPY Drops to 171.40 After Reaching Yearly High on Trade War Fears

EUR/JPY Drops to 171.40 After Reaching Yearly High on Trade War Fears

The EUR/JPY pair retreated to 171.40 during Thursday's Asian session, marking its second consecutive day of decline after reaching a one-year peak of 172.28 on Wednesday.

Safe-Haven Demand Boosts Japanese Yen

The Japanese Yen (JPY) regained strength amid mounting safe-haven demand, triggered by fresh US tariff threats. President Donald Trump announced a sweeping round of country-specific tariffs ranging from 20% to 50%, all effective August 1. This includes a 25% tariff on Japanese goods and a 50% duty on copper imports, adding to fears of an escalating global trade war.

Mixed Signals from Japan–US Trade Talks

While the Yen gained support, there are concerns that the US–Japan trade relationship may deteriorate. Discussions hit a roadblock due to US pressure on Japan’s rice market protections, further complicated by the newly announced tariffs.

Progress in EU–US Trade Relations

On a more positive note, EU Commission Vice President Maroš Šefčovič stated that “significant progress” has been made toward a framework trade agreement with the US, which could offer some medium-term support for the Euro (EUR).

Market Outlook: Volatility Ahead

The EUR/JPY may remain volatile as:

• Traders assess the fallout from Trump’s tariff policy
• JPY safe-haven flows compete with Euro support from EU–US progress
• Eyes remain on further developments in global trade diplomacy