• EUR/JPY strengthens to around 183.90 in Wednesday’s early European session. 
• The BoJ is likely to raise rates by the end of June, with expectations unchanged by the Middle East war, according to a Reuters poll. 
• Escalation of conflict in the Middle East might help limit the Japanese Yen’s losses. 

The EUR/JPY cross gains ground to near 183.90 during the early European session on Wednesday. The Japanese Yen (JPY) softens against the Euro (EUR) amid market doubt about the speed of the Bank of Japan (BoJ) normalization. Traders will keep an eye on the final reading of the Harmonized Index of Consumer Prices (HICP) from Germany, which is due later on Wednesday. 

A Reuters poll showed on Wednesday that all 64 respondents said the BoJ would keep rates unchanged at 0.75% at its upcoming policy meeting next week. Nonetheless, 60% of economists anticipate the policy rate will reach 1.00% by the end of June, largely unchanged from 58% in February’s poll.

Last week, BoJ Governor Kazuo Ueda signaled a likely prolonged hold on interest rates due to the potential economic impact of the Middle East conflict.

Rising geopolitical tensions in the Middle East, particularly threats to the Strait of Hormuz, could boost a safe-haven currency such as the Japanese Yen and act as a headwind for the cross. 

Iran’s Islamic Revolutionary Guard Corps (IRGC) warned that if US and Israeli attacks continue, Iran could block regional oil exports. On Wednesday, the IRGC announced the start of targeting the enemy’s technological infrastructure in the region, raising fears of a prolonged war in the region.