- Despite the holiday in Japan yesterday there was a huge amount of volatility in USDJPY as rumours of central bank intervention led to a whippy day with the pair trading between 154.55 and 160.17. This represents to widest daily trading range since late 2022 when Japanese authorities last intervened in FX markets. Japan’s currency official, Masato Kanda chose to keep investors speculating by declining to comment when asked about intervention, saying that details of BoJ action would be released at the end of May.
- Euro area inflation is released later this morning, with the headline print for April expected to have slowed provisionally to 0.6% from 0.8%. At the same time, the GDP report for the first quarter will be released with markets forecasting a small positive print of 0.1%. In line prints will likely further boost the odds of an initial rate cut from the ECB at their June policy meeting. Whilst a June cut is almost a given, the big question is just how many subsequent rate cuts the ECB will be able to deliver this cycle. Markets are currently pricing approximately three reductions by the end of the year, pushing them ahead of the FOMC who do not appear to currently be able to cut until the November or December meeting.
- The FOMC kick off their two-day policy meeting later today, with no change in policy expected but markets will look for further clues from Chairman Powell’s post meeting speech. This afternoon we look forward to the release of the Consumer Confidence report in a busy week for US data which focuses on the labor market culminating with Friday’s NFP report.
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