USD: Fed focus shifts to inflation path – TD Securities
TD Securities’ FX strategists Jayati Bharadwaj and Howard Du note that stronger United States (US) payrolls produced only a modest reaction in the US Dollar (USD), as markets focus more on inflation than labor data. With the Federal Reserve’s (Fed) 2026 path now tied to the energy shock’s pass-through to core prices, they expect choppy USD trading and see near-term downside as elusive without progress in the Middle East.
Dollar reacts modestly to strong jobs
"The stronger than expected payrolls report had a modest reaction in the USD. We have flagged that the Fed path for the year now leans much more on how much the energy shock from Q1 will pass through to core inflation, rather than on labor market conditions (as long as they remain stable). This could potentially be why markets are reacting more to the softer wage growth data in the report rather than the stronger headline jobs number."
"We have flagged that the Fed path for the year now leans much more on how much the energy shock from Q1 will pass through to core inflation, rather than on labor market conditions (as long as they remain stable). This explains the timid reaction in the FX space, and the CPI report next week will be more closely watched."
"In the absence of fresh new catalysts, we continue to expect choppy USD price action in the near-term. Hawkish FOMC dissents and US data resilience has made near-term USD downside more elusive with positive developments on the Strait of Hormuz needed for the USD selloff to continue."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Democrats Sweep Congress! Morgan Stanley Emergency Redraws Trade Map: Overweight Stocks Remain, AI Data Centers Become the Biggest Losers
Due to rising expectations for restrictive measures on data centers, market sentiment in the AI sector may be further negatively affected. However, Morgan Stanley's overall outlook remains intact, expecting resilient economic growth and continued gradual decline in inflation.
Solana falls below $100, Ethereum struggles at $2,317 as sellers dominate
CVS Health (CVS.US) Exceeds Expectations for Eight Consecutive Quarters, Plunges 12.5% Overnight After "One Becomes Two" Split! Why Doesn't the Split Lead to a Revaluation?
On Wednesday, CVS Health (CVS.US) announced plans to split into two separate entities, while also delivering its eighth consecutive quarter of earnings that beat expectations. The company’s 2027 profit guidance also surpassed Wall Street consensus. However, the market reacted in the opposite way: at the close of trading overnight, the company’s stock price plunged by 12.5%.
The US stock power sector faces a reshuffle! Midterm elections increase the risk of data center delays; Morgan Stanley lists the damaged parties and relative winners.
Morgan Stanley: The midterm elections increase the risk of data center delays, and with a 474GW grid backlog in Texas, the "power-on timing" stocks are being reshuffled.
Crypto prices
More
