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EUR/JPY rebounds from below 162.00 after German Friedrich Merz is confirmed as the new Chancellor.
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Merz was unable to secure an absolute majority in the initial Bundestag vote.
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Trump's tariff threats on pharmaceutical imports have heightened demand for JPY as a safe-haven currency.
The EUR/JPY pair rebounds above 162.00 during the North American trading session after finding support near 161.60, the intraday low. The recovery comes after Germany’s Conservative leader Friedrich Merz secures an absolute majority with 325 votes in the second round of voting in the Bundestag, the lower house of Parliament.
In the first round, Merz received 310 votes, falling six short of the 316 needed to become Chancellor, despite the CDU/CSU and Social Democrats holding a combined 326 votes in the Bundestag.
Merz’s confirmation as Chancellor alleviates concerns over political instability and is expected to bolster defense spending measures approved in March.
However, expectations that the European Central Bank (ECB) will cut interest rates in its June meeting are likely to limit the Euro’s upside. The ECB is widely anticipated to reduce rates by 25 basis points (bps), marking the seventh consecutive rate cut. The decision is based on the strong belief that Eurozone inflation will reach the central bank's 2% target by year-end.
Meanwhile, the Japanese Yen (JPY) strengthens as renewed tariff threats from U.S. President Donald Trump increase demand for safe-haven assets. Trump has threatened to impose tariffs on pharmaceutical imports, with the announcement set for two weeks from now.
