The weak US dollar longs were shaken out by today's unexpectedly soft CPI but strong overall risk appetite has some in the market re-thinking. If stocks can rally day after day, maybe that's a sign the Fed can afford to hike further?

The Nasdaq hasn't let up at all and is higher by 2.5% while the S&P 500 is up 1.8%.

Fed funds implied probabilties of a 75 bps hike fell as low as 30% from 70% yesterday but have slowly crept back to 41%. SImilarly the dollar has fallen hard today but is starting to find a bid. The euro has its own set of problems and hasn't made as much progress against the dollar as most other currencies.

EURUSD 15 mins Aug 10

The drift back lower in the euro still leaves it above the top of the recent range but takes the shine off what had looked like a strong breakout on the daily chart.

EURUSD daily chart

Part of what's dogging the euro are sky-high power prices. Those add an inflationary impulse but won't be solved by ECB rate hikes. The risk is that they hike into a slowing, stagflationary economy that's undone by energy. TTF benchmark natural gas prices in Europe were up 4.6% on Wednesday and remain stubbornly high.