The US dollar is leaping higher as North American trading picks up.
The commodity currencies and pound are being hit particularly hard and USD/JPY touched 144.45, which is a new seven-month high.
What's driving the moves?
1) The soft Australian CPI report today along with a soft Canadian report yesterday might be kicking off a rethink on the path of rates and the probability that they're done hiking sooner than expected. BOC probabilities are down to 55% from 65% for the July 12 meeting.
2) Strong US data. Yesterday's strong US consumer confidence and new home sales are raising the possibility the Fed could hike to 6%. The market is coming to appreciate the amount of fiscal stimulus in the US economy and the pipeline.
3) Yuan matters. Chinese banks intervened in the yuan yesterday to prop it up and there was talk we would see the same today but the PBOC didn't lean hard in the fixing and that's sparked a sense they will allow more dollar strength.
4) Quarter end flows. We're counting down the final days of Q2 and these moves could be driving by dollar flows. We're in the most-liquid part of the day so the latest moves -- in all likelihood -- are flow-related.
