Dollar Rebound Hinges on Stronger Data and Policy

The US Dollar's potential rebound is tied to stronger data and policy follow-through, according to TD Cowen's Washington Strategy team. Led by Chris Krueger, the analysts emphasize that a durable recovery in the Dollar relies on renewed upside surprises in US data and more robust policy implementation.

Currently, the team remains broadly bearish on the Dollar due to limited upside versus other major currencies like the Canadian Dollar and Chinese Yuan. Markets are awaiting key releases such as US payrolls and inflation figures, which could provide crucial insights into the economic outlook.

The analysts expect a meaningful rebound in August's US payrolls after last month's disappointing showing, while also highlighting the importance of the EUR's upcoming CPI release. Meanwhile, US Treasury yields remain relatively flat, with term premium dipping as markets digest updates to the buyback program.