USD: Fed focus shifts to inflation path – TD Securities

FXStreet Insights Team FXStreet

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.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD remains in two-day highs around 1.3260

GBP/USD adds to Friday’s bounce, gathering fresh traction and flirting with the 1.3270 zone on Monday, or two-day tops. Cable’s decent advance comes despite the move higher in the Greenback and investors’ assessing of UK PM K. Starmer's resignation.

EUR/USD remains offered; focus is on 1.1400

EUR/USD rapidly gives back Friday’s rebound and trades with marked losses near 1.1420, or three-month lows, in the latter part of Monday’s NA session. The pair’s intensifies its retracement following the continuation of the robust upside momentum in the US Dollar. Next on tap will be preliminary PMIs the Germany and the Euroland.

Gold trades below $4,200 on hawkish Fed bets, bullish USD

Gold struggles to capitalize on the previous day's modest gains and edges lower during the Asian session on Tuesday. Firming expectations for a Fed rate hike and geopolitical uncertainties help the US Dollar to stand firm near its highest level since May 2025, undermining bullion. However, bearish Oil prices ease concerns about inflation and prospects for more aggressive tightening by central banks, which should limit losses for the yellow metal.

NYSE parent ICE, OKX partners to expand tokenized equities and digital asset markets

The New York Stock Exchange parent company, Intercontinental Exchange, and crypto exchange OKX have formed a joint venture to develop infrastructure for tokenized and blockchain-native financial products, according to a statement on Monday. The venture will seek to operate as a US-registered broker-dealer and futures commission merchant, subject to regulatory approvals.

Is Shiba Inu dead or just in a crisis? The data behind SHIB's 95% crash

SHIB, the dog-themed meme coin that became one of the biggest success stories in crypto and turned early buyers into crypto millionaires, is facing tough times. Its price has fallen more than 32% so far this year, and it is down 95% from its all-time high in 2021. Is SHIB simply another fading meme coin, or is the market overlooking a possible recovery story?

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.