FOREX: FX OPTION EXPIRY

Key support in the form of the August 14 low (146.21) in USD/JPY held to the pip in Tokyo trade, with broader stabilisation in the USD helping the pair back to 146.65 through early London trade.

• This evening’s Fed decision will of course be key for at least shorter-term direction.
• Westpac look to sell USD/JPY on any break below 146.20 with a target of 144.00 and a stop set at 147.05. They believe that “risks around the FOMC are tilted asymmetrically, with risk appetite channels likely a key driver in the event of an underwhelming/net hawkish outcome, capping USD/JPY upside. BoJ Governor Ueda likely keeps a cautious door open to the possibility of tightening monetary policy in Oct. The entry of centrist Koizumi in the LDP race lowers the tail risks of a disruptive loosening of Japanese fiscal policy”.

Revisions to the ECB wage tracker were immaterial relative to the July update. The tracker excluding one-off payments (which is probably the best measure of underlying compensation pressures) was estimated at 2.581% in Q1 2026, down from 2.610% in July. 

• The tracker now includes data up to Q2 2026, albeit with a low employee coverage. Wages excluding one-offs is currently seen at 2.41% Y/Y.
• As indicated by President Lagarde in the September press conference, the tracker continues to suggest that compensation pressures will ease in the coming years.
• The ECB projects annual compensation per employee growth at 2.7% Y/Y in Q1 2026 and 2.5% in Q2 2026 (vs 3.9% in Q2 2025). Compensation growth is then seen growing back to 2.8% Y/Y by Q4 2027.
• The ECB's press release for the latest wage tracker update is here.

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