A strong first quarter GDP reading sparked speculation the Fed won't tilt toward sooner rate hikes but a mostly dovish Yellen cut the US dollar's wings. Still, USD was the top performer on the day while the yen lagged. Look for markets to continue digesting the news while keeping an eye out for an Argentine default.  In our latest Premium Insights, AUDNZD and NZDUSD hit their final targets, while USDJPY was stopped out. EURUSD and USDCHF nearing their final targets, while EURJPY and GBPUSD remain in progress. All details are in the Premium Insights.

New York traders filled the thermos with coffee ahead of a busy day that started with ADP employment. The report added little to the debate at 218K compared to 230K expected. It was a small miss but close enough to expectations to keep the good news on the jobs front intact.

The surprise came shortly afterward when the first reading on Q2 US GDP was +4.0% compared to 3.0% expected. Q1 was also revised to 2.1% from 2.9%. There were some caveats in the report including a large build in inventories but the overall picture was strong and the US dollar climbed 30-80 pips across the board.

Like we warned, the market has repeatedly bet on a hawkish shift at the Fed and the non-stop talk ahead of the announcement was that it might finally come. But once again Yellen failed to deliver. The statement acknowledged some improvement in the economy but emphasized a significant underutilization of labor resources.

The good news for the hawks was a nod that inflation has moved somewhat “closer” to the long-run objective. The immediate reaction was still disappointment and the dollar pared a portion of its gains.

Ultimately the Fed remains on a slow path toward a more hawkish policy and that will drive the US dollar higher but you have to wonder if now's that time. For instance, USD/JPY has risen in 9 consecutive sessions and it might be a time for a pullback.

The headlines in the hours ahead will focus on Argentina. The country is in last minute negotiations to avoid a default. It's a complicated situation and the market has leaned heavily in the past two days toward a positive solution but anything is possible.

If Argentina defaults it will ultimately be contained but it might give markets an excuse to retrace some recent moves.

The US dollar climbed broadly as traders buckle up for a big day but the source of buying might not be what you think. The dollar was the top performer while the kiwi continued to lag. The day ahead is jam-packed with top-tier indicators.  In today's edition of the Premium Insights, we publish a new justification for the existing EURJPY trades with two new charts as they net +150 pips gain. Both EURAUD trades are netting +500 pips gain, while last week's PRE-RBNZ AUDNZD trade netted +190 pips.1 of 2 GBPUSD long  was stopped out. Full access to trades & charts is in the Premium Insights.

The market will be transfixed on the news and releases in the day ahead but below the surface a little-talked-about trade might be poised to have a bigger impact.

Chinese shares have surged 6% in the past week and some related products have seen massive volume spikes. Rumors of market liberalizations are fuelling the gains but we wonder where the money is coming from.

Over the last two years money flooded into Europe and propped up the euro but that money might be looking for a new home. Fund managers like Bill Gross have proclaimed the end of the bull market in periphery bonds as Spanish 10-year yields fall below 2.5%. Lately, equities have also cooled off.

Could that hot money be leaving Europe and heading for China? That sort of flow would help explain the persistent weakness in the euro and strength in the dollar.

It's something to monitor but for now the focus now shifts to a number of major releases. Markets will begin to simmer with the release of June prelim Japanese industrial production at 2350 GMT. The consensus is -1.2% m/m and -5.2% y/y. Soft employment and retail sales data yesterday raised risks for further easing from the BOJ and kept the yen under pressure despite risk aversion.

That will be followed by German CPI, ADP employment, US GDP and the FOMC decision. Markets may be hesitant to react to any single release but watch for an extended move over the following days as traders digest the news.

Ashraf previewed those events and more earlier.