Sterling was again the weakest of the major currencies as markets sees the BoE nearly as likely to cut rates in June as the ECB after a dovish shift in rhetoric, while firm U.S. data keeps Fed easing off the agenda until September or November.

Sterling fell 0.16%, but was well off Monday's 1.2299 low and lowest since Nov.
14, with 2-year Gilts yields falling 9bp and the spread below Treasury yields marginally exceeding 2024's wide.

The limited 1.2300 breach likely enticed some buying ahead of Jonathan Haskel and Huw Pill appearances on Tuesday that will be closely scrutinized after the normally hawkish Bank of England Deputy Governor Dave Ramsden on Friday expressed more confidence that UK inflation risks are receding.

USD/JPY made a new 34-year high and is extremely close to the 155 level many see potentially inducing Japanese verbal or actual FX intervention to cushion the yen's 5.7% drop since early March and nearly 10% slide this year.

An easing of geopolitical derisking that triggered Friday's fleeting dip to 153.49 and the rising 10-day moving average there has given way to another run at heavy 155 optionality.

IMM specs are the most net long USD/JPY since 2007 due to rewarding interest rate differentials and doubts that FX intervention to support the yen would do more than delay further USD/JPY gains.
Even further BoJ rate hikes of perhaps 20bp by year-end might not provide much of a deterrence unless U.S. data and Fed policy become dovish again.

EUR/USD fell 0.04%, remaining in a choppy range above April's 2024 lows at 1.0601.
Prices slid on Monday from 1.0671 highs by the falling 10-DMA and are digesting the more negative Bund-Treasury yield spreads since hot U.S. data forced the expected delay on Fed rate cuts.
Total 2024 Fed cut pricing is at 40bp from over 150bp earlier this year versus the 75bp of cuts expected from the ECB, perhaps starting as soon as June.

Flash April PMIs on Tuesday and German Ifo on Wednesday will be watched ahead of Thursday's U.S. GDP and Friday's BoJ meeting, April Tokyo CPI and U.S. core PCE, with income and consumption eyed if PCE inflation data is as forecast.

Beyond that the focus is on the April U.S. employment report on May 3.

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