Interesting divergence since Monday
On Friday after Yellen and Fischer spoke at Jackson Hole, all markets moved in the same direction -- hawkishly.
The dollar rose, bonds sold off and stocks declined. The odds of an FOMC hike in the Fed funds futures market rose to 42%.
Since then, there has been a moderation. Fed funds futures are back down to 32%, the S&P 500 is above where it was last Thursday and US Treasury yields are back to where they were beforehand.
To me the divergence argues that the US dollar has run too far, too fast. It's the top performer again today.
What could it be? Tomorrow is the last day of August and month-end flows could be giving the dollar a bit extra.
