Dollar rally loses steam following weak payrolls data

Despite the rise in US Treasury yields this week, the US dollar reversed some of its recent gains after today’s labour market data were somewhat weaker than expected. But given strong wage growth, we doubt this will alter the Fed’s policy path. Indeed, US inflation data released next Wednesday may add to evidence that inflationary pressures are proving less “transitory” than generally anticipated. Our view remains that this will push US yields and the dollar a bit higher in the coming months.