Ella 
The EUR/JPY cross attracted some selling in the early European session on Tuesday, trading around the 161.65 level. The Japanese yen (JPY) strengthened against the euro (EUR) amid concerns over U.S. President Trump’s tariffs and the escalating U.S.-China trade war.
Markets were shaken by continued trade-related uncertainty sparked by Trump and his renewed attacks on Federal Reserve Chairman Jerome Powell. This in turn has driven safe-haven inflows, which is bullish for the yen in the short term. White House economic adviser Kevin Hassett said on Friday that Trump and his administration are still studying whether they could fire Federal Reserve Chairman Jerome Powell.
Additionally, rising market expectations that the Bank of Japan (BoJ) will continue to hike interest rates could drive yen strength and weigh on EUR/JPY. Bank of Japan Governor Kazuo Ueda said last week that Japan’s real interest rates are still very low and the central bank is expected to continue raising rates if the economy and prices are in line with expectations. This view was further supported by Bank of Japan board member Junko Nakagawa.
On the euro front, a dovish stance from the European Central Bank (ECB) could weigh on the common currency. The ECB decided to cut its main interest rate by 25 basis points to 2.25% at its April meeting last week. At a press conference, European Central Bank President Christine Lagarde said that U.S. tariffs on EU goods have risen from an average of 3% to 13%, which is already hurting Europe’s economic outlook.
Investors will be focusing on preliminary readings of the euro zone and German HCOB Purchasing Managers’ Index (PMI) for April, due later on Wednesday. If the report shows stronger-than-expected results, that could help limit the euro’s losses.
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