USD flows: USD firmer on US data

The USD has benefitted from stronger than expected retail sales data as well as a dip in initial claims and a better Philadelphia Fed survey. While none of this data is dramatically strong, it is all on the firm side and has pushed front end US yields higher. The market is now showing a little more uncertainty about the rate cuts at the next two FOMC meetings, with just 42bps of easing now priced by the December meeting. EUR/USD can now press down towards 1.08, but the JPY has seen the biggest move, with USD/JPY above 150 to its highest since July. There is still scope for some more modest USD gains if the US numbers continue to come in on the strong side, but yield spreads suggests USD/PY is overstretched, and we are likely to be near the end of the USD rally that has been in place since the last FOMC.