EUR/USD and EUR/JPY Rebound as Trump Signals Potential De-escalation in Middle East

The EUR/USD pair and the risk-sensitive EUR/JPY rebounded from their recent lows as President Trump signaled a potential easing of geopolitical tensions in the Middle East. This shift followed Trump's decision to delay military strikes against Iran, which resulted in flat trading for the USD/CAD pair as safe-haven demand for the US Dollar eased. Market sentiment improved as the prospect of immediate military action appeared to recede, allowing investors to refocus on monetary policy outlooks. Hawkish signals from European Central Bank (ECB) sources remain a key support factor, with discussions about interest rate hikes potentially starting as early as April. Currently, markets are pricing in approximately 85 basis points of ECB tightening by the end of the year. The recovery in EUR/JPY specifically highlights a return of risk appetite across global financial markets following the de-escalation signals.

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