April 25 (Reuters) - The dollar index fell 0.28% after wild swings due

to below forecast U.S. GDP accompanied by Q1 inflation gauges well above

forecast and an unexpected drop in jobless claims that sent Treasury yields to

their highest since November and left only one Fed rate cut this year fully

priced in.

    The euro and most other currencies initially rose in response to the GDP

miss, then fell on the core PCE rise to 3.7% and frothy 5.1% services prices ex

energy and housing, a metric Chair Jerome Powell has mentioned as a gauge of

embedded inflationary pressures.

    But EUR/USD rose 0.3% after rebounding from its lows that held Wednesday's

1.0678 low, as the U.S. soft landing and dollar exceptionalism narrative came

under review. Keep in mind the Q1 GDP drag from inventories and below trend

government spending may set the stage for rebounds in Q2. And growth in personal

income increased more than in Q4.

    EUR/USD's 1.0741 high on EBS Thursday retraced half of April's 1.0885-601

slide. A further recovery might need Friday's March U.S. core PCE, income and

spending data to be softer than forecast.

    USD/JPY rose 0.13% in the face of rising Treasury-JGB yields spreads, but

with gains moderated ahead of Friday's BoJ meeting where what, if anything,

might be done to stem the yen's slide and risk of imported inflation will be the

focus.

    The MoF has yet to make good on repeated threats to support the yen, which

markets had thought might happen in defense of the 155 level that prices now

trade above. Those threats were further weakened by comments Wednesday from an

LDP official that the party is not yet actively discussing what yen levels would

be deemed worth intervention, though 160 or 170 might be eyed.

    Adding to uncertainty about intervention was U.S. Treasury Secretary Janet

Yellen on Thursday noting that dollar strength is due to economic divergence,

and that interventions by other governments in currency markets is acceptable

only in rare and extraordinary circumstances. Hardly a green light for the MoF

to step in soon.

    Sterling rose 0.4%, with the FTSE 100 hitting a record high and being the

only major European equity index not in the red. That despite British retailers

suffering their worst April for sales since 2020, although the timing of the

Easter holidays could be to blame, a CBI survey showed on Thursday.

    The market is pricing in 42bp of BoE rate cuts by year-end versus 35bp by

the Fed, 61bp by the ECB and 22bp of hikes from the BoJ.

For more click on FXBUZ

(Editing by Burton Frierson

Randolph Donney is a Reuters market analyst. The views expressed are his own.)

((Randolph.donney@thomsonreuters.com))