investingLive European FX news wrap: JPY skyrockets on "rate check", BoE stays neutral

BOE leaves bank rate unchanged at 3.75% in April meeting, as expected Dollar slides across the board after USD/JPY selling hits USD/JPY tumbles further after intervention warning earlier Tokyo officials give currency traders one final offramp BoE preview: will the central bank make another step towards a rate hike? Italy April preliminary CPI +2.8% vs +2.6% y/y expected Eurozone April preliminary CPI +3.0% vs +2.9% y/y expected Eurozone Q1 preliminary GDP +0.1% vs +0.2% q/q expected The ECB is stuck between a rock and a hard place Japan's top currency diplomat issues final warning before action in FX market Italy Q1 preliminary GDP +0.2% vs +0.1% q/q expected Japan's Katayama: We are getting closer to taking decisive step in FX market Germany Q1 preliminary GDP +0.3% vs +0.2% q/q expected Germany April unemployment change 20k vs 4k expected ECB preview: a hawkish hold is expected but there's risk of a disappointment Spain Q1 preliminary GDP +0.6% vs +0.5% q/q expected French inflation continues to pick up in April to highest since July last year What are the main events for today? FX option expiries for 30 April 10am New York cut Germany March retail sales -2.0% vs -0.1% m/m expected Germany March import prices +3.6% vs +3.0% m/m expected France Q1 preliminary GDP 0.0% vs +0.2% q/q expected Morgan Stanley scraps call for Fed rate cuts this year Japan reportedly mulls bringing back energy subsidies this summer It's been a hell of a session today with lots of economic data, yen intervention and the BoE rate decision. Let's start with the most important economic data. The Eurozone Q1 GDP missed forecasts coming in at 0.1% vs 0.2% expected. The growth impulse has been pointing more towards a neutral stance for the ECB with a slightly hawkish bias in case the war drags on for several more months. Bear in mind that GDP is expected to contract further in Q2 if the war extends into summer. At the same time of the Eurozone GDP, we got the Eurozone Flash CPI report. Headline CPI did increase as widely expected but the Core CPI eased further to 2.2% vs 2.3% in the prior month. The economic data leading up to today's ECB decision supports more a patient approach rather than an outright hawkish leaning as expected by the market. The main highlight of the session though was the Japanese yen. USD/JPY broke above the key 160.00 handle yesterday and extended the gains early in the session in what looked like the next leg into a new cycle high. But Katayama and Mimura said no... Japanese Finance Minister Katayama warned the markets that they were getting closer to taking decisive steps in the FX market. This gave the JPY the first boost. As the yen started to depreciate again, Japanese Top Currency Diplomat Mimura said that they were in close contact with their US counterparts and that it was his final warning before action. The yen started to appreciate again but the momentum wasn't that strong until 10:26 GMT when we started to see a much stronger move. Since the JPY didn't move in a straight line for 200+ pips as it generally happens with an outright intervention, everyone speculated on "rate checks". The playbook looks very similar to late January when we got the verbal intervention and then the rate checks. The yen might get some reprieve in the short-term but the fundamentals are still heavily skewed to the downside. Finally, we had the Bank of England rate decision where the central bank left interest rates unchanged at 3.75% but used a more cautious tone than expected. There was no major hawkish leaning. BoE acknowledged that monetary policy cannot affect global energy prices, and should generally look through the initial impact on inflation but added that the risk of second-round effects would depend partly on how long energy prices remained elevated. Coming into the meeting, traders were pricing in a 63% chance for a rate hike in June but after today's decision, the probability fell to 48%. This article was written by Giuseppe Dellamo