USD softened further overnight

USD softened further overnight (EUR/USD up to 1.0764, GBP/USD to 1.5337, AUD/USD to 0.7216, USD/JPY to 122.62, and USD/CAD to 1.3247). Nothing has fundamentally changed and expect any rally in EUR/USD up to 1.0870/90 (last seen pre-strong NFP) should attract fresh shorts.

If anything, comments from FOMC officials have reinforced the view that markets may be too complacent in their definition of "gradual". The forward curve is priced for just three hikes by the end of next year. Mester (hawk) said the September dots are the best guide to the intended path. Lockhart (more dovish) said he expects rate hikes at "not every meeting" (though no one expects that). 

Fischer confirmed once again the overwhelming Fed rhetoric of a very likely Dec lift-off (he says the Fed has done everything to avoid a surprise); given that the odds of a Dec hike are now at ~75%, US economists note that a surprise at this point would be no move. He says foreign central bankers have told the Fed to "just do it".