It's never straight-forward in the market.
The US dollar fell on a soft CPI report but it's come storming back with USD/JPY up to 139.87 from a low of 139.02.
The rebound in the dollar mirrors a rise in Treasury yields. US 10-year yields are up 0.5 bps to 3.77% from a low of 3.68% post-CPI.
Why the rethink? The details of the CPI report are dovish, even core which was driven by used cars and set to reverse later.
Looking at the Fed curve, there is about a 65% chance of a hike priced into July and that hasn't changed much, so perhaps the market is thinking more about inflation in the months ahead and the potential that it stays sticky. The $2.40 rebound in oil prices today also speaks to that (though it still doesn't erased yesterday's drop).
Under the surface in equities, there's a rotation to value from growth and that often means non-US stocks, so there could be some flows at work as the market begins to feel better about global growth, especially with the China rate cut today.
