• EUR/JPY trades around 187.25 on Wednesday, posting a modest 0.05% gain on the day.
• European Central Bank officials adopt a cautious tone amid uncertainty stemming from the energy shock and the Middle East war.
• The Japanese Yen remains influenced by Oil price movements and expectations surrounding Bank of Japan policy.

EUR/JPY trades around 187.25 on Wednesday at the time of writing, up a modest 0.05% on the day. The cross remains supported by relative stability in the Euro (EUR) as investors assess the impact of geopolitical tensions and diverging monetary policy expectations between Europe and Japan.

European Central Bank (ECB) President Christine Lagarde warned that the Eurozone economic outlook remains highly uncertain due to a significant energy supply shock linked to tensions in the Middle East and the blockade of the Strait of Hormuz. Although energy prices have not yet reached their worst-case levels, she stressed that the outlook remains fragile.

ECB Governing Council member Martins Kazaks also said that the central bank is “not in a rush” to move on interest rates. According to him, uncertainty linked to the Middle East war remains very high and its impact on the real economy is only gradually being felt, giving the ECB time to gather more data before making any policy decisions.

Markets are now awaiting several speeches from ECB officials later in the day, including Christine Lagarde. In this context, the central bank is widely expected to maintain a cautious stance at its April meeting, preferring to wait for additional economic data before adjusting monetary policy.

On the Japanese side, the Japanese Yen (JPY) is moving within a complex environment. The currency remains sensitive to energy price fluctuations, as Japan relies heavily on Crude Oil imports from the Middle East.

At the same time, investors widely expect the Bank of Japan (BoJ) to leave interest rates unchanged at its April meeting while assessing the economic fallout from the Middle East conflict. However, according to Reuters sources, the central bank could signal a potential shift toward policy normalization as early as June, while raising its inflation outlook and lowering growth forecasts.

Geopolitical developments also remain closely monitored. United States (US) President Donald Trump said he would extend the ceasefire with Iran at Pakistan’s request while maintaining the US naval blockade of Iranian ports. Any escalation or prolonged tensions in the Middle East could revive demand for safe-haven assets such as the Japanese Yen and create headwinds for the EUR/JPY pair.