AUD/JPY advances to near 93.00 as risk sentiment improves due to easing US-EU tensions

• AUD/JPY rises due to improved risk sentiment after President Trump extended the 50% tariff deadline on imports from the EU.
• The AUD continues to draw support from renewed optimism surrounding a 90-day US-China trade truce.
• The JPY may limit its downside as Japan is widely expected to close a trade deal with the United States soon.

AUD/JPY extends its gains for the second successive day, trading around 93.00 during the European hours on Monday. The risk sentiment improves US President Donald Trump extended the 50% tariff deadline on the European Union (EU) from June 1 to July 9. On Friday, Trump threatened in a post on Truth Social to impose tariffs on imports from the European Union. The easing of the US-EU trade war has supported the Australian Dollar (AUD), while undermining the safe-haven Japanese Yen (JPY), and acts as a tailwind for the currency cross.

The AUD gains support against its peers amid renewed optimism surrounding a 90-day US-China trade truce and hopes for further trade deals with other countries. However, the Reserve Bank of Australia will closely monitor further developments on US-China trade negotiations, as China is a major trading partner of Australia.

The upside of the AUD/JPY cross could be restrained as Reserve Bank of Australia's (RBA) Governor Michele Bullock supported the last week's 25 basis points interest rate cut and mentioned that the central bank is prepared to take additional action if the economic outlook deteriorates sharply, raising the prospect of future rate cuts.

Additionally, the Japanese Yen (JPY) will regain its ground on hopes that Japan will strike a trade deal with the United States. On Sunday, Japan's chief trade negotiator Ryosei Akazawa is expected to advance tariff negotiations with the US during a June meeting between President Trump and Japan's Prime Minister Shigeru Ishiba, per Bloomberg.

The JPY gained support from growing acceptance that the Bank of Japan (BoJ) will continue raising interest rates after the release of hotter-than-expected consumer inflation figures from Japan on Friday.