Why the US dollar is leaping higher today

<p>The US dollar is leaping higher as North American trading picks up.</p><p>The commodity currencies and pound are being hit particularly hard and USD/JPY touched 144.45, which is a new seven-month high.</p><p>What's driving the moves?</p><p>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.</p><p>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.</p><p>3) Yuan matters. Chinese banks <a href="https://www.forexlive.com/centralbank/china-state-banks-seen-intervening-in-usdcnh-supporting-the-yuan-20230627/" target="_blank" rel="follow">intervened </a>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.</p><p>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.</p>

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