A look at the day ahead in European and global markets from Vidya Ranganathan

A holiday in Japan is giving markets time to digest the BOJ's momentous monetary policy decision and to focus on the equally consequential Fed policy decision due Wednesday.

Before that, there's German inflation data and the more intensely debated UK inflation numbers that markets reckon the Bank of England has been misreading.

The BoE meets on Thursday and is expected to hold rates. A first easing in June is put at 50-50, with 25 bps fully priced in for August and 60 bps for all of 2024..

Already a top performer among major currencies this year, sterling made more headway against the yen overnight, as did the euro rising to 16-year highs against the yen.

For, while the BOJ has abandoned negative rates, the yen remains undeniably the cheapest funding currency on the block, and the Fed's certain to drive that message home further.

The U.S. central bank is considered certain to keep rates at 5.25-5.5% on Wednesday and all eyes will be on the FOMC dot plots for rates and inflation.

Analysts assume policy makers will look through the recent run of unhelpfully high inflation readings as a seasonal and statistical aberration, but there has to be a risk the median dot plot shifts to two 25 bps rate cuts this year rather than the former three cuts.

Futures now imply markets have pushed back the timing for the first Fed cut to June, and maybe even July.

A slew of European Central Bank officials including Christine Lagarde speak later in the day. Some officials have endorsed June as the likely month to start discussing ECB rate cuts.

Luxury stocks in Europe will be in focus after Kering warned on Tuesday that its first-quarter sales are likely to drop by around 10%, weighed by star label Gucci, knocking back hopes that it had stemmed sales declines.

Key developments that could influence markets on Wednesday:

Data: UK inflation, German inflation, Euro zone consumer confidence, FOMC.

Speakers: ECB policymaker Pablo Hernandez de Cos; ECB President Christine Lagarde, chief economist Philip Lane Lagarde and board member Isabel Schnabel at a conference in Frankfurt.

Debt auctions: Germany-Reopening of 28-year debt.

(Editing by Sam Holmes)