EUR/JPY trims losses after French PM Lecornu's policy speech

• The Euro pares losses after Sébastien Lecornu proposes suspending the pension reform.
• Political stabilization in Paris offers mild support to the single currency.
• The JPY remains firm amid Japan's political uncertainty and speculation over a BoJ intervention.

EUR/JPY retreats on Tuesday, trading around 175.80, down 0.20% on the day at the time of writing, but slightly off an intraday low at 175.36. The pair pared earlier losses following French Prime Minister Sébastien Lecornu's policy speech, which aimed to reassure markets about France's political stability and fiscal trajectory.

Lecornu announced the suspension of the 2023 pension reform until the presidential election in 2027, confirming that neither a rise in the legal retirement age nor an extension of contribution periods would take place before January 2028. The decision, seen as a conciliatory move toward trade unions and opposition parties, helped ease fears of renewed political tensions and a new snap election in Paris, providing a modest lift to the Euro.

A vote of no confidence is scheduled for Thursday in the National Assembly, filed by several opposition parties. However, Prime Minister Lecornu's decision to suspend the pension reform, a key demand from the Socialist Party, has significantly reduced the chances of the motion passing. Markets therefore expect the Lecornu government to withstand this political test, providing a degree of institutional stability in the medium term and limiting the immediate risk of another government crisis in France.

Meanwhile, the Japanese Yen (JPY) retains a supportive momentum as Japan faces heightened political instability. The collapse of the ruling coalition has weakened the position of the new Liberal Democratic Party (LDP) leader, Sanae Takaichi, while Finance Minister Katsunobu Kato reiterated the government's concern over "one-sided and rapid moves" in the foreign exchange market, fueling speculation about a possible Bank of Japan (BoJ) intervention.

In this mixed context, the EUR/JPY pair remains under pressure, caught between temporary relief from France's policy shift and persistent JPY strength, underpinned by safe-haven flows and Japan's ongoing political uncertainty.