EUR/JPY drops to near 186.00 amid fresh intervention warnings from Japan

• EUR/JPY retreats to 186.20 from two-week highs above 187.50, turns negative on the day.
• Japanese Finance Minister Katayama said that "the time for decisive action" is near.
• German GDP beat expectations in Q1, but unemployment rose unexpectedly.

The Euro (EUR) has pulled back form two week highs above 187.50 against the Japanese Yen (JPY) on Thursday, retreating to 186.20 at the time of writing, as Japanese Finance Minister Satsuki Katayama launched a clear intervention warning.

Katayama affirmed on Thursday that the "timing for decisive action is near" and that Japanese authorities are getting closer to stepping into the FX markets. These comments arrive after the USD/JPY crossed the key 160.00 level, considered a line in the sand for Tokyo.

The JPY was showing the weakest performance among the G8 currencies on Thursday. The latest jump in Oil prices and the prospect of an extended blockade in the Strait of Hormuz have reactivated concerns about the consequences for the Crude-importing Japanese economy, offsetting the hawkish tone of the Bank of Japan’s (BoJ) recent monetary policy meeting.

In Europe, German jobless figures in March disappointed. The unemployment rate rose to 6.4%, against the market consensus of a steady 6.3% rate from February. Data from Destatis revealed that the number of jobless workers increased by 20K, exceeding the 4K forecasted by market analysts and keeping the total unemployment figure beyond 3 million.

These figures offset the 0.3% increase of the first quarter's Gross Domestic Product (GDP), which beat expectations of a slight slowdown to 0.2%, following another 0.3% quarterly gain in the last three months of last year.

In the Eurozone, inflation figures have confirmed the higher inflationary pressures stemming from the Middle East conflict. The Eurozone preliminary Harmonized Index of Consumer Prices (HICP) has risen 1% in April, following a 1.3% increase in March. Moreover, the HICP rose 3% YoY, from 2.6% in March, and exceeded market expectations of 2.9%.

The focus now shifts to the European Central Bank (ECB), which will disclose the outcome of its last monetary policy meeting. The bank is likely to keep its benchmark interest rate on hold, but hint at rate hikes in the near term, pressured by the rising prices.