USDCAD 10 mins

The US dollar is at the lows of the day in broad selling that's helping to lift risk assets.

Some of the help has come from softer pricing data in the ISM report and via unit labor costs but that's balanced out by very strong ADP jobs numbers. Yet the dollar is down and falling further, particularly against the pound and commodity currencies.

I think much of this is a result of the big shift yesterday triggered by comments from FOMC members Jefferson and Harker, who both talked about skipping a rate hike in June and hiking instead in July. Those comments were later elevated by WSJ Fed leaker Nick Timiraos, making it even more obvious that this is a coordinated communications strategy.

The odds of a hike in June have fallen to 30% from 70%.

That's a big shift and the thinking is that if the Fed skips June, it's might yet skip July. Gasoline prices are running at -30% y/y in June and that will be a big drag on CPI data, along with other soft commodities. Moreover, even if the Fed

does hike in July again, it's now more-certain to be the end of the cycle.

Combine that with increasing comments from corporates about soft demand since March and fears about 6% Fed funds are dissipating.

Said differently, the Fed downshifted the terminal rate significantly yesterday and it's taken some time for the FX market to sort that out. That's why the dollar is selling off today.