EUR/JPY softens to near 183.50 as Venezuela crisis strengthens safe-haven currency

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The EUR/JPY cross loses ground to around 183.65 during the early European session on Monday. The Japanese Yen (JPY) strengthens against the Euro (EUR) on rising geopolitical tensions in Venezuela. The Eurozone Sentix Investor Confidence report will be released later on Monday.

EUR/JPY weakens to near 183.65 in Monday’s early European session.
Trump laid out plans for Venezuela as Maduro awaits court appearance.
ECB kept interest rates unchanged last month and signaled that they are likely to remain unchanged in 2026.

The US Army's Delta Force attacked Venezuela and captured its President Nicolás Maduro, along with his wife, on Saturday. US President Donald Trump said early Monday that Washington might make a second military intervention if Venezuela’s interim president, Delcy Rodríguez, did not accommodate their demands. The US attack on Venezuela raises fears of geopolitical risks, boosting safe-haven currencies like the Japanese Yen (JPY) and acting as a headwind for the cross.

However, the Bank of Japan's (BoJ) cautious stance on further policy tightening and the lack of a clear timeline for future interest hikes might cap the upside for the JPY. Most economists expect the next rate hike to be delayed until the second half of 2026, possibly in October.

The European Central Bank (ECB), however, kept rates unchanged at its December policy meeting, and its outlook suggested less urgency for further cuts. This, in turn, could provide some support to the EUR. ECB President Christine Lagarde noted that all options remain on the table and there was no discussion of rate hikes or cuts at the December meeting, though some economists anticipate the rates to remain steady through 2026.

(This story was corrected on January 5 at 04:45 GMT to say, in the third bullet point, that ECB kept interest rates unchanged last month and signaled that they are likely to remain unchanged in 2026, not this month.)

ECB FAQs

What is the ECB and how does it influence the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

What is Quantitative Easing (QE) and how does it affect the Euro?

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

What is Quantitative tightening (QT) and how does it affect the Euro?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

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