EUR/JPY weakens to near 177.50 as US and Japan sign deal to secure rare earths supply

• EUR/JPY softens to around 177.60 in Tuesday's Asian session.
• Trump and Takaichi signed an agreement to 'secure' the rare earth supply. 
• Traders brace for the Bank of Japan and the European Central Bank interest rate decisions later on Thursday. 

The EUR/JPY cross loses ground to near 177.60, snapping the five-day winning streak during the Asian trading hours on Tuesday. The Japanese Yen (JPY) strengthens against the Euro (EUR) after US President Donald Trump and Japan's Prime Minister Sanae Takaichi signed a framework for securing the supply of critical minerals and rare earths. The Bank of Japan (BoJ) and the European Central Bank (ECB) interest rate decisions will be in the spotlight later on Thursday. 

Trump and Takaichi met for the first time on Tuesday in Tokyo. Both countries signed an agreement laying out a framework to secure the mining and processing of rare earths and other critical minerals. These developments followed China's recent decision to tighten export controls on the materials, which are crucial for a wide range of products. 

Takaichi has vowed to realize a "golden age" in her country's relations with the US at the start of a meeting with Trump. Easing trade tensions between the US and Japan provides some support to the JPY and acts as a headwind for the cross. Trump will meet China's Xi Jinping in South Korea on Thursday for high-level discussions amid a bruising trade war.

On the Euro's front, the Socialist Party will decide by the end of the week whether to topple France's Prime Minister Sebastien Lecornu's government if next year's fiscal plans don't include significant tax increases on the wealthy, per Bloomberg.  

Standard & Poor's (S&P) Global downgraded France's rating

on Friday in a surprise update, citing political instability that put the government's efforts to repair its finances at risk. Fears of political turmoil in France exert some selling pressure on the EUR against the JPY. 

The ECB is anticipated to keep Eurozone borrowing costs at 2.0% for its third consecutive meeting, with inflation under control and the long-struggling Eurozone economy looking healthier. Investors will closely monitor the ECB President Christine Lagarde's press conference for clues about the path forward.