EUR/USD, USD/JPY, EUR/GBP flows - CPI, retail sales, Moody's

Pretty flat overnight session. Japan Sep core CPI moves to 2.1%y/y, in line with market, with ex fresh food and fuel up 2.4%. Recent sources suggest the BoJ may up its inflation forecasts next month, while pricing is for policy to be left unchanged with odds moving from 50-50 in Dec through to the next hike by early next year, if global conditions have not deteriorated.

In terms of the day ahead, main interest comes after the close with Moody’s France review. While some rigid passive index funds would have to respond to a downgrade, otherwise the market has been running well ahead of this and further front running with the acceleration higher in spreads yesterday. Yesterday’s surge moved up to around 177/8bp and there’s some backfilling off those highs early on. 168 is pullback support on the hourly chart if some event trade profit trading comes in, but otherwise the trend is still currently an accelerating one higher with some significant intervention looking needed to arrest a 2011 echo move out to 200 big picture. 

UK Retail sales correct more sharply than consensus with the -0.4% print (mkt -0.1%) more than reversing the previous month’s 0.5% gain and taking the yr/yr rate down to 0.8%, with similar reversals in the ex-fuel measure. While the data can be sawtooth and choppy this does point to a loss of momentum as consumer’s pullback against the current backdrop bracing into the winter. A Nov hike is a given now, but this is the kind of data keeping the BoE cautious and sceptical of the extent and pace of tightening in the market at this point going forward. Just a touch of slippage for GBP this morning. EUR/GBP remains parked around the fib level consolidating oversold conditions.