FX:USDJPY   U.S. Dollar / Japanese Yen
Lautenschlaeger remained neutral on the margin, stating raising rates wouldnt help anybody but neither would the change to the APP or further cuts. This comes in line with last weeks ECB's to leave policy unchanged.

I think this is more pressure for EUR bids but undoubtedly i think USD will dominate the pair until the fed on the 21st and fed funds pricing will sway EUR$'s price range until then. However, on a no vote, combined with the ECBs hawkish-neutral monpol decision my bets will be with EUR$ heading towards the 1.14 upper percentile of the range. Conversely a surprise hike decision will likely shock EUR$ 200-300pips lower than market on the day, though i wouldnt be surprised to see dips brought as we have consistently seen with EUR$ and monpol changes in the past 12m .

On the day fed funds trade flat implying 15% probability for september, hence the shock risk is higher, though i do believe the true probability to lie somewhere near here. US 10yr yields also hit 3m highs today interestingly despite there being a risk-off lingering in the air. For USD now though I prefer to buy yen here on rallies in $Yen, yen broadly cheap given risk-sentiment and BOJ no move (in conjunction with FOMC now move). Also i think sterling is cheap here going into BOE, no action is going to happen imo given the strength of data so i prefer to buy dips into 1.310/5. The inflation "Miss" selling is an over-reaction given we are still at the higher levels recorded in CPI , and clearly there is a new normal lower with inflation which the market is under-pricing in GBP. Unemployment data and retail sales will be watched closely, beats will put GBP back on the bid to 1.34 (assuming BOE are neutral) especially given an FOMC no move puts the fed below their own targets and should cause firm supply.

ECB Lautenschlaeger highlights:

ECB's Lautenschlaeger: Raising Interest Rates Now Would Benefit Nobody, Not Even Savers or Banks
ECB's Lautenschlaeger: I Still Consider Negative Rates to be Justified Despite Risks, Side Effects
ECB's Lautenschlaeger: We Shouldn't Feel Obliged to Cut Rates Even More
ECB's Lautenschlaeger: We Don't Seem to Have Reached Lower Limit For Rates
ECB's Lautenschlaeger: See No Reason Now to Change Design of Bond-Purchase Program
ECB's Lautenschlaeger: Must Give Bond Purchases Time To Work
ECB's Nowotny Says Monetary Policy Should Stimulate Domestic Demand
Nice analysis thanks that's great work ;-)
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