AUD/USD extends gains to 50 pips as risk trade recovers


The Aussie dollar challenges the June 22 high after the UMich consumer sentiment survey showed inflation expectations weren’t as high as the Fed thought.

This led to a broad selloff in the US dollar and a jump in US stocks.

The likelihood of a 50 basis point hike in July instead of 75 basis points has jumped but is rebounding as the market struggles to decide what comes next. The odds stand at 22% from a high of 29% a short time ago.

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

There is also an ongoing reflexivity in the market. The improved mood has lifted oil prices, but this is spilling over to (higher) bond yields and could temper equities.

This article was written by Adam Button at www.forexlive.com.


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