EUR/JPY slumps to near 159.00 as Japanese Yen strengthens amid safe-haven demand

• EUR/JPY tumbles to near 159.00 as the safe-haven demand of the Yen increases.
• The BoJ is expected to raise interest rates again this year.
• Investors anticipate German debt reforms to accelerate inflationary pressures.

The EUR/JPY pair falls sharply to near 159.00 in European trading hours on Monday. The pair faces sharp selling pressure as the Japanese Yen (JPY) outperforms across the board amid dismal market sentiment.

Deepening doubts over the United States (US) economic outlook under the administration of President Donald Trump has increased the safe-haven appeal of assets, such as the Yen and Swiss Franc (CHF). Meanwhile, the US Dollar is facing strong selling pressure as signs of a slowdown in the US economy have prompted Federal Reserve (Fed) dovish bets.

Apart from the safe-haven demand, firm expectations that the Bank of Japan (BoJ) will raise interest rates again this year. Such a scenario would reduce rate differentials of the BoJ against other major central banks.

Meanwhile, the Euro (EUR) is underperforming at the start of the week, except the US Dollar, as investors start digesting German debt reforms. Last week, German leaders agree to stretch borrowing limit or so-called "debt brake" to boost defense spending and stimulate economic growth. Investors expect German debt reforms would boost inflation in the Eurozone.

On Thursday, European Central Bank (ECB) President Christine Lagarde refrained from guiding the impact of German debt restructuring on the monetary policy and the inflation outlook. Lagarde said in the press conference after the policy decision that said the increased defense and infrastructure spending is still a "work in progress" and the ECB "needs time" to understand the impact.