The US dollar went into overdrive today on rising expectations for a 100 basis point hike from the Federal Reserve but Fed hawk Christopher Waller just delivered a hard pushback.
100 bps hike odds are now 37% from +80% earlier today. That reversal has competely turned around the bond market. US 2-year yields are now down 1 bps from up 12 bps a short time ago. The dollar and stocks are also reversing.
If we get the compete intraday reversal in the dollar it would start to look like a blow-off top with USD/JPY and EUR/USD both cracking big levels and hitting 20 year lows.
What makes it compelling is that there's a fundamental underpinning for the move. Not only did Waller say that 100 bps is unlikely unless retail sales and housing starts are "materially" above expectations, he also said that 75 bps would get the Fed to neutral and "you don't want to overdo rate hikes".
Those are strong and clear words from one of the biggest Fed hawks and certainly the most-hawkish 'core' Fed member. Notably, another hawk -- Esther George -- made similar comments about hiking too quickly earlier this week.
Things are moving quickly now but NZD/USD is nearly back to flat on the day.
