EUR/JPY attracts bids below 162.00 as German Merz secures majority in second attempt

• EUR/JPY bounces back from below 162.00 as German Friedrich Merz is confirmed as new Chancellor.
• German Merz failed to secure an absolute majority in the first voting process at the Bundestag.
• Trump's tariff threats on pharmaceutical imports have increased the JPY's safe-haven demand.

The EUR/JPY pair rebounds above 162.00 during the North American trading session after attracting bids near 161.60, which is the intraday low. The pair bounces back as Germany's Conservative leader Friedrich Merz secures an absolute majority after getting 325 votes in the Bundestag or the lower house of Parliament in the second attempt.

Friedrich Merz received 310 votes in the first attempt, six short of 316 required to be elected as Chancellor of Germany despite the CDU/CSU and Social Democrats collectively commanding 326 votes in Bundestag.

The confirmation of Friedrich Merz as Chancellor has diminished fears of political instability and is expected to boost defense spending measures approved in March.

However, firm expectations that the European Central Bank (ECB) will reduce interest rates in the June policy meeting will limit the Euro's (EUR) upside. The ECB is widely expected to cut interest rates by 25 basis points (bps). This will be the seventh interest rate cut by the ECB in a row. The reasoning behind firm ECB dovish bets is high conviction that the Eurozone inflation is on track to return to the central bank's target of 2% by the year-end.

Meanwhile, the Japanese Yen (JPY) performs strongly as fresh tariff threats from United States (US) President Donald Trump have increased its safe-haven demand. Trump threatened to impose tariffs on pharmaceutical imports, which will be announced in two weeks.

On the domestic front, investors await the Bank of Japan (BoJ) monetary policy meeting minutes, which will be published on Wednesday.