EUR/JPY Cross Surges to 161.15 as Japanese Yen Weakens Against Euro
The European session of the forex market witnessed a significant move in the EUR/JPY cross, with the pair extending its rally to around 161.15. This development comes amid a risk-on mood in the financial markets, following the announcement made by US President Donald Trump regarding the delay in imposing tariffs on autos from Canada and Mexico.
Background:
The US-Mexico-Canada Agreement (USMCA) is the replacement for the North American Free Trade Agreement (NAFTA). The new trade pact was signed by the leaders of the three countries in November 2018, but it still requires ratification by the legislative bodies of each country. The US Congress has yet to approve the deal, and the delay in ratification has led to uncertainty in the markets, particularly with regards to the automotive sector.
Trump’s Decision:
On March 1, 2019, US President Donald Trump announced that he would be delaying the implementation of tariffs on imported cars and auto parts from Canada and Mexico for one month. This decision was made to give the US Congress more time to ratify the USMCA. The announcement came as a relief to the markets, as the imposition of tariffs could have led to a significant increase in the prices of automobiles and auto parts.
Impact on EUR/JPY:
The announcement led to a surge in risk appetite, with investors buying riskier assets such as equities and selling safe-haven currencies like the Japanese Yen. The EUR/JPY cross, which is considered a proxy for risk sentiment in the forex market, extended its rally to around 161.15, marking a significant gain from the previous day’s close of around 159.80.
Impact on Individuals:
For individuals who are invested in the forex market, this development could mean potential profits if they had positioned themselves for a rally in the EUR/JPY pair. However, it is important to note that forex trading involves significant risk and should only be done with proper knowledge and experience.
- Individuals who are planning to buy a car in the near future could see a potential increase in prices if the USMCA is not ratified soon and tariffs are imposed.
- Investors in the automotive sector could see a potential increase in profits if the USMCA is ratified and tariffs are avoided.
Impact on the World:
The delay of tariffs on imported cars and auto parts from Canada and Mexico could lead to a number of positive outcomes for the global economy:
- Avoiding a potential trade war between the US, Canada, and Mexico, which could have led to negative economic consequences for all three countries.
- Encouraging the ratification of the USMCA, which could lead to increased economic cooperation between the US, Canada, and Mexico.
- Boosting investor confidence, which could lead to increased investment and economic growth.
Conclusion:
The announcement made by US President Donald Trump regarding the delay in imposing tariffs on imported cars and auto parts from Canada and Mexico led to a significant rally in the EUR/JPY cross, as the Japanese Yen weakened against the Euro amid a risk-on mood in the financial markets. This development could lead to potential profits for individuals who are invested in the forex market, but it is important to note that forex trading involves significant risk. Additionally, the delay of tariffs could have positive outcomes for the global economy, including avoiding a potential trade war and encouraging the ratification of the USMCA. However, it is important to stay informed about developments in the news, as they can have significant impacts on financial markets and personal investments.
Stay informed and stay profitable!
