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Talking Points:

• Japanese Yen continues to push higher, hits 18-month high vs. US Dollar

• Eurozone GDP data a non-event for the Euro but may boost risk appetite

• Upbeat US PCE reading may rekindle June FOMC rate hike speculation

The Japanese Yen continued to strengthen in overnight trade, rising to the highest level in 18 months. The move played out alongside a decline in S&P 500 futures, pointing to risk-off sentiment as the driver behind price action. The Australian Dollar tracked gains in the S&P/ASX 200 stock index, which diverged from an otherwise downbeat mood across major Asian bourses. Energy and raw materials shares led the way higher, following a recovery in crude oil prices.

The greenback declined against all of its major counterparts in a move that may reflect ebbing Fed rate hike bets following yesterday’s disappointing first-quarter GDP print. The world’s largest economy grew at an annualized pace of 0.5 percent in the three months through March, falling short of expectations calling for a 0.7 percent increase. The priced-in probability of a June rate hike has dropped to 12 percent, down from 21 percent yesterday.

Eurozone CPI and GDP figures headline the economic calendar in European trading hours. The headline inflation rate is expected print at -0.1 percent year-on-year in April, unchanged from the prior month. Output growth is expected to rise 0.4 percent in the first quarter, marking the largest increase since the three months to June 2015.

News-flow out of the common currency area has increasingly improved relative to consensus forecasts over the past two months, opening the door for upside surprises. While such results are unlikely to be materially supportive for the Euro considering the ECB’s steadfast commitment to aggressive monetary stimulus, they may boost confidence in global growth dynamics and encourage an improvement in risk appetite. That could prove supportive for the sentiment-sensitive commodity-bloc FX and cap Yen gains.

Later in the day, the spotlight turns to US PCE figures. The Fed’s favored inflation gauge is expected to show the core price growth rate edged down to 1.6 percent in March after hitting a three-year high at 1.7 percent in the prior month. Measures of cost pressure have increasingly improved relative to expectations since mid-2015, hinting that analysts’ models may be understating reality and opening the door for an upside surprise. Such a possibility is reinforced by the quarterly PCE gauge released within yesterday’s GDP report, which unexpectedly surpassed the FOMC’s long-run objective to register at 2.1 percent.