The Australian dollar is challenging the June 22 high in a pop after the UMich consumer sentiment survey showed that inflation expectations weren’t as high as the Fed thought.

That’s led to broad selling in the US dollar and a jump in US stocks.

The odds of a 50 bps hike in July rather than 75 bps have jumped but are bouncing around as the market struggles to decide what will come next. The odds sit at 22% from a high of 29% a short time ago.

What’s more important is the terminal rate that the Fed sees. It’s in the 3.50-3.75% range at the moment but that’s actually up from earlier.

There’s a reflexivity ongoing in the market as well. The better mood has boosted oil prices but that’s feeding back into bonds yields (higher) and could temper stocks.

This article was written by Adam Button at

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