TD Cowen’s Washington Strategy team, led by Chris Krueger, has stated that a sustainable rebound in the United States Dollar (USD) depends on stronger US policy follow-through and renewed upside surprises in US economic data, particularly upcoming payrolls and inflation releases [1]. The analysts currently maintain a broadly bearish outlook on the Dollar, citing limited upside potential against the Canadian Dollar and Chinese Yuan as markets await these key data points [1].
According to TD Cowen, 'Durable USD rebound requires stronger policy follow-through & renewed upside in US data.' The team expects US payrolls to show a meaningful rebound in August, following a very disappointing performance in July [1]. Additionally, the upcoming Eurozone Consumer Price Index (CPI) release is noted as a significant event for market participants [1].
The article also highlights that while US rates are digesting updates to the Treasury's buyback program, the yield curve remains flatter and the term premium has decreased [1]. US markets are expected to focus on the payrolls report next week, with a stronger-than-expected result likely to trigger a sharper market reaction compared to a subdued employment report [1].
CONCLUSION
TD Cowen analysts emphasize that the US Dollar's potential for a durable rebound is closely tied to stronger payrolls and economic data. Until such data materializes, the outlook remains broadly bearish, with limited upside seen against major currencies. Market participants are expected to closely monitor the upcoming payrolls and inflation releases for direction.