Despite weaker than expected consumer data from both Germany and France, EUR/USD was well bid on the final trading session of the week, rising through the key 1.3000 level on the back of EUR/JPY flows and month end jockeying. Both German and French consumer data missed their mark, with German Retail sales contracting by -2.8% versus -0.3% while French consumer spending fell -0.2% versus -0.1% eyed.
German Retail Sales hit a 38 month low erasing the small gains in September and bringing the annual rate of increase down to only 0.8%. All of the non-food items were down by -1.8% in September as consumers in Europeâ€™s largest and wealthiest economy shut their purses tight in the wake of economic slowdown in the region. The decline in spending coincided with increase in German unemployment but forward data may provide some relief as unemployment losses in Germany appeared to have stabilized and Novemberâ€™s Markit retail PMI data showed broadly stable conditions.
The euro however ignored all of the economic data, as trading was driven primarily by massive EUR/JPY flows. USD/JPY resumed its advance taking out the recent swing highs on reported M&A flows surrounding the Softbak/Sprint deal and continued accomodative rhetoric from Japanese officials with the latest idea suggesting that BOJ should purchase foreign sovereign bonds. Japan is already one the of the largest holders of UST, but this proposal would involve BOJ purchasing other G-20 paper all with the goal of weakening the yen.
Month end flows may also come into play as the day proceeds, but as we move towards North America focus will turn once again to Washington DC where the political wrangling over the Fiscal Cliff continues. If there is even a hint of positive news, the EURUSD could make a run towards 1.3050 level as the day proceeds.