A look at the day ahead in European and global markets from Rae Wee

Traders in Europe will be waking up to a nervy currency market after the yen's sharp reversal from its slide past 160 per dollar on Monday had some speculating Tokyo could be behind the move while the country was out on a holiday.

The jump in the yen - which took it to a session-high of 156.55 per dollar - came just a few hours after it slid to the weaker side of 160 per dollar for the first time since 1990, marking a fresh 34-year low.

Some said the rapid strengthening of the yen smelt like intervention, but markets will have to wait till Tuesday for any signals from authorities.

While Japanese authorities had constantly insisted they aren't targeting any specific levels but rather the pace of the yen's decline, the Liberal Democratic Party's Takao Ochi said last week that the 160 level could be it.

Also, if the currency's 5% slide this month has yet to raise any alarms, then it's unclear what would.

Elsewhere, Germany's preliminary inflation figures for April are also due later in the day, which could provide a good snapshot of what to expect when the wider bloc releases its inflation and economic growth data on Tuesday.

That could strengthen market bets for the European Central Bank to kick off its rate-easing cycle in June, though policymakers aren't expected to move very fast thereafter.

Still, the main highlight for the week remains the Federal Reserve's two-day policy meeting ending Wednesday, where all eyes will be on what Fed Chair Jerome Powell says with regard to the central bank's rate outlook.

Much has changed since its last meeting in March, and a hawkish tone from Powell is pretty much a given with the slew of solid economic data the U.S. has had in recent times.

While market pricing shows that a September rate cut is still on the cards, even that is gradually starting to pare back, based on the CME FedWatch tool.

In the world of electric vehicles, Tesla CEO Elon Musk arrived in Beijing on Sunday on an unannounced visit, where he was expected to discuss the rollout of Full Self-Driving software and permission to transfer data overseas.

His visit came just over a week after he scrapped a planned trip to India, raising concerns that its expansion plans in the South Asian country may be put on hold.

Key developments that could influence markets on Monday:

- Germany preliminary CPI (April)

- Euro zone business climate (April)

- Euro zone economic sentiment (April)

(Editing by Jacqueline Wong)