FOREX: USD/JPY Struggles on Approach to Recovery High Ahead of GDP

• Italy HICP surprised to the upside coming in a 2.1%Y/Y - but we note the Bloomberg consensus was 2.0%Y/Y while Reuters consensus was 1.8%Y/Y - so there is a bit of a disparity between the size of the surprise here, depending upon which survey you follow.
• Assuming that Dutch and German HICP come in in line with consensus and there are no big changes to the Y/Y rates of Austria, Ireland and Portugal (the former two out at 11:00BST) we see the EZ print tracking at broadly 2.1-2.2%. The Bloomberg median is at 2.2% - but there are more analysts forecasting 2.3%Y/Y than 2.1%, so there may be some very modest downside risks.
• Looking more at Italian HICP, core under the Eurostat definition (ex energy, food, alcohol and tobacco) came in at 1.8%Y/Y (1.5% prior) while under the Istat definition of ex energy and unprocessed food, it rose from 1.8%Y/Y to 1.9%Y/Y.
• Services rose 2.7%Y/Y in March (2.6% in February) with energy increasing 3.3%Y/Y (0.6% prior), "food, alcohol and tobacco" 2.7%Y/Y (from 2.4%) and core goods (non-energy industrial goods) increasing 0.5%Y/Y (versus a 0.1%Y/Y decline in February).
• Istat notes that core goods prices were boosted by the end of winter sales of clothing and footwear (which rose 1.3%Y/Y in March versus -0.6%Y/Y in February).

Modest widening in German ASWs this morning given the risk-off price action detailed elsewhere, spreads across the curve ~0.2-0.5bp wider vs. 3-month Euribor.

• Note that Bund and Buxl spreads have unwound effectively all the sell off that followed the announcement that initially indicated the surprise, expedited debt-brake tweak and related fiscal loosening.
• The combination of a lack of an immediate shift higher in German issuance, already short positioning in ASWs and U.S. tariff risks has countered the initial move lower in ASW spreads and does present risks to any fresh move lower in long end spreads in the immediate term.
• Still, fundamentals appear to continue to screen bearish for long end spreads over the medium-term.

• ITALY MAR FLASH HICP +1.6% M/M, +2.1% Y/Y