Risk-Off Drives USD, JPY Higher as Trump Tariff Extension Fails to Calm Markets

Broad risk-off sentiment dominated the European session as markets showed limited relief from President Trump's tariff deadline extension, with traders viewing the delay as merely kicking the can down the road rather than resolving underlying trade tensions. Oil prices surged to new highs amid weekend risk hedging and escalating geopolitical tensions after the IRGC warned the Strait of Hormuz remains closed to US allies, adding further pressure to risk-sensitive currencies. Central bank commentary added complexity, with ECB's Muller suggesting preemptive action on second-round effects may be warranted, while policymaker Patsalides pushed back against rate hike urgency. Meanwhile, the BOJ released revised estimates for Japan's economic outlook, keeping yen dynamics in focus. Interest rate expectations shifted notably over the week as markets reassessed the policy trajectory across major central banks. Traders should monitor crude oil developments and geopolitical headlines closely, as further Strait of Hormuz escalation could amplify safe-haven flows into USD and JPY while pressuring commodity-linked currencies like AUD and CAD.