EUR/JPY rises amid fading Yen demand on US-China trade optimism, Euro stability

• EUR/JPY rises as Japanese Yen demand fades amid easing US-China trade tensions.
• Calming comments from US President Donald Trump regarding disputes with China reduce fears of a full-blown trade war.
• In Europe, the Euro remains supported despite lingering political uncertainty in France.

EUR/JPY trades around 176.20, up 0.25% for the day on Monday at the time of writing. The pair benefits from lower demand for safe-haven assets as investors welcome signs of relaxation between Washington and Beijing.

US President Donald Trump posted on Truth Social on Sunday, "Don't worry about China, it will all be fine!" and added that his administration wants to "help China, not hurt it." These remarks contrast with his Friday threat to impose 100% tariffs on Chinese imports starting November 1, which initially reignited fears of trade war escalation. Beijing responded by saying it would not hesitate to retaliate if those levies were implemented, but markets focused on Trump's more conciliatory tone over the weekend.

In Japan, the prospect of expansionary fiscal policy under incoming Prime Minister Sanae Takaichi, combined with the continuation of loose monetary policy, weighs on the Japanese Yen (JPY). The Komeito party's withdrawal from the ruling coalition, however, adds political uncertainty and complicates the formation of a new government.

In Europe, the Euro remains supported by a relative easing of political tensions in France. French President Emmanuel Macron confirmed the reappointment of Sébastien Lecornu as Prime Minister, one week after his resignation, who named Roland Lescure as Finance and Economy Minister. Despite the fragile political backdrop, investors now believe that an early legislative election is unlikely, which slightly improves market sentiment.

Minutes from the European Central Bank's (ECB) September meeting showed a broad consensus to maintain the current monetary policy stance, with most members judging that interest rates are consistent with the 2% medium-term inflation target.

However, market caution persists. Investors await further developments in the US-China trade relationship and updates on France's political stability before confirming a sustained recovery in risk appetite.