TD Securities’ Macro Research’s FX team notes the softer US payrolls data is only marginally negative for the Dollar, with the labor market still described as buoyant and neither overheating nor deteriorating. They argue market pricing for Fed hawkishness has likely peaked and see near-term rate hike expectations easing in both the US and Europe.

TD sees limited upside for USD

“FX: We have a greater conviction to fade the USD rallies than to chase the USD to a new high.”

“The softer payrolls report (headline, AHE, revisions) is marginally weighing on the USD.”

“It is hard for us to see persistent bullish USD signals from the US data/ Fed channel alone.”

“However, we do not yet see the macro fundamentals justifying a move into a new higher orbit for the USD or a reversion back to peak safe haven era.”

“On balance, we have greater conviction in fading USD rallies than chasing for any return to 2025 highs.”