Dollar Consolidation Ahead as Fed Hike Expectations Ease

The US Dollar has been experiencing a consolidation phase following the disappointing July Payrolls report. According to TD Securities strategists, this weakness in the USD is expected to be limited unless there's further softening of US inflation, which would reduce expectations for Fed rate hikes.

The EUR/USD pair may struggle to break above 1.16 without a benign CPI print, while USD losses could extend against select Emerging Market currencies.

In the aftermath of the July Payrolls report, markets saw the risk of a hike linger, but expectations for core and headline CPI next week, expected at 0.20% m/m and 0.15% m/m, respectively, are likely to lead to further pricing out of hikes.