GBP, JPY flows: GBP little changed after retail sales, JPY weak

UK retail sales were much as expected in November, with little change on the month and a slightly upward revision to October. The data are a little uncertain, as black Friday is included in this year’s November data but wasn’t in last year’s, making seasonal adjustment challenging. But the data as reported shows a fairly stable trend over the last 3 months and suggests EUR/GBP will continue to trade in the mid 0.87s.

JPY weakness overnight after the BoJ rate hike looks a little overdone, as Japanese yields are generally higher with 10 year JGB yields above 2% for the first time since 2006 and at their highest level since 1999. While it seems clear that JPY weakness is now not really yield related, it is unclear what is driving it other than broad momentum. As we have said before, if the Japanese authorities want the JPY to move back towards fair value, physical intervention looks increasingly necessary to change sentiment and break the trend.