Eurozone retail sales dipped 0.1% in September, matching August’s decline and missing forecasts for growth, though year-over-year sales rose just 1% amid improving consumer confidence. Germany’s industrial production rebounded 1.3% in September but remains down 1% annually, with analysts expecting only modest, cyclical gains ahead from rising orders, lower inventories, and planned infrastructure spending. ECB officials highlight balanced growth risks, moderating services inflation, and unexpected economic resilience, justifying steady rates at 2%; analysts see narrowing US-Europe growth gaps supporting the euro, with one major investment house forecasting $1.20 by Q4 2025 and $1.26 by Q3 2026 as the ECB pauses while the Fed eases.

The yen strengthened sharply during yesterday’s dollar sell-off amid a shift to risk-off sentiment, though it’s premature to label the November 4 high of 154.48 in USDJPY as the rally’s peak. Japan’s September wage data showed nominal growth of 1.9% YoY as expected, but the BOJ’s key scheduled full-time pay measure rose only 2.2% (below 2.5% forecast), while real earnings fell 1.4% for the ninth straight month, highlighting ongoing pressure on purchasing power and consumer demand. With Governor Ueda focused on next year’s wage talks, major unions like UA Zensen and Rengo are targeting 5-6% hikes in 2026, signaling potential support for sustainable inflation and a BOJ rate hike—though persistent negative real wages may temper expectations for aggressive tightening. Household spending rose 1.8% YoY in September (missing 2.5% forecast but marking five months of gains), underscoring resilient domestic demand that accounts for over half of GDP. Any lasting USDJPY decline may depend more on aggressive Fed rate cuts than a single BOJ hike.

The RBA’s decision to hold rates at 3.6% and signal no further cuts until mid-2026 supports AUD appreciation into next year, with short-term dips likely holding above 0.6400. Near-neutral rates, rising core inflation above target, and Australia’s stronger GDP growth (1.8%-2.3% through 2027) versus the US (1.9%-2%) bolster domestic demand amid a stable job market. Improving China-US trade ties should lift China’s economy and global risk appetite, aiding the AUD despite a recent risk-off phase and October export dip, while reduced short positions, an 8% undervaluation per Bloomberg’s BEER model, and historical lows reinforce a bullish medium-term outlook unless risk aversion intensifies.