EUR/USD, USD/JPY flows - Fed's Waller ups the ante into the CPI data

CPI data remains the big event today and comments from Fed’s Waller have upped the ante notably. Speaking at a BoE event, Waller suggested that he favours a Dec hike, even if the CPI data improves, while a half-point move may be needed if Oct comes in at 0.3% or higher. That skews the reaction function to the data and reinforces defensiveness into the release and some relief if it is on-consensus. A high print though could see quite aggressive money market reaction to adjust for the shift in 0-25-50 weighted probabilities. Elsewhere, Waller is generally quite hawkish noting staff projections point to ongoing persistent producer price pressures, concern over breadth of price pressures, and need for further tightening, although he does suggest the recent market reset corrects it more in line with Fed thinking so that offers some constraining framing.