EUR/JPY slumps to near 161.00 as Trump threatens 50% tariffs on Eurozone

• EUR/JPY tumbles to near 161.00 as the Euro declines after Trump threatens to impose 50% tariffs on imports from the EU.
• The ECB is certain to lower interest rates in the June meeting.
• Hot Japan National CPI data for April increases BoJ hawkish bets.

The EUR/JPY pair slides to near 161.00 during North American trading hours on Friday, the lowest level seen in a month. The pair slumps as the Euro (EUR) weakens after United States (US) President Donald Trump threatens to impose 50% tariffs on imports from the European Union (EU) in a post on Truth.Social during late European trading hours after Brussels sent a not-so-good trade proposal to Washington.

"Our discussions with them are going nowhere! Therefore, I am recommending a straight 50% tariff on the European Union, starting on June 1, 2025. There is no tariff if the product is built or manufactured in the United States. Thank you for your attention to this matter!", Trump said.

A fresh escalation in trade tensions between the economies has led to a sharp decline in the demand for the Euro (EUR). The impact of US-EU trade issues would be significant on the major currency as goods exported by the EU in 2024 were almost double from what it imported from the US, according to the Office of the US Trade Representative.

Meanwhile, US Treasury Secretary Scott Bessent has also warned in an interview with Fox News that the EU is "not negotiating in good faith".

Additionally, higher hopes that the European Central Bank (ECB) will reduce interest rates in the June policy meeting have also weighed on the Euro.

On the Tokyo front, the Japanese Yen (JPY) outperforms a majority of its peers, except antipodeans, on hotter-than-projected Japan's National Consumer Price Index (CPI) data for April, released earlier in the day. As measured by the CPI, the inflation data, excluding Fresh Food, rose at a faster pace of 3.6%, compared to estimates of 3.4% and the March reading of 3.2%.

Hot Japan CPI data has increased confidence among market experts that the Bank of Japan (BoJ) could hike interest rates in the July meeting.

Analysts at ING said in a note, "Hotter-than-expected Japanese consumer inflation, especially the core inflation hitting an over two-year high, should increase the odds of a BoJ rate hike in July."