Dollar's Bearish Momentum Extends After In-Line July CPI, TD Securities Says

TD Securities strategists say bearish momentum in the US dollar extended after July US inflation prints broadly matched expectations. Headline CPI rose 0.1% month-on-month and core CPI increased 0.2% month-on-month, figures that TD Securities notes were in line with forecasts and that help to reinforce existing market expectations around Federal Reserve policy.

Why the in-line July CPI matters for the dollar and Fed expectations

Because the CPI prints landed close to consensus, TD Securities highlights that the data directly reinforces prevailing views on policy paths and rate expectations. In practice, in-line inflation statistics tend to leave the trajectory of interest-rate expectations and Treasury yields more dependent on upcoming data and Fed communications rather than prompt an immediate re-pricing. For the dollar, this means that any ongoing directional momentum may remain sensitive to fresh signals from macro releases and official commentary rather than a single CPI surprise.

Implications for key FX instruments and traders

Forex markets may view the in-line CPI as confirming the status quo: expectations for Fed policy remain a central driver of USD-linked instruments, while cross-asset dynamics such as Treasury yields and risk sentiment continue to influence currency flows. The DXY index may remain sensitive to shifts in rate expectations and yields, and major pairs like EUR/USD and USD/JPY could be influenced by how those expectations evolve. Traders are likely to watch moves in yields and any shifts in risk appetite for clues about near-term FX behaviour, as these channels often explain correlations across currencies.

TD Securities’ assessment underlines that the CPI result did not alter the broad narrative around inflation and policy, leaving market participants to parse subsequent datapoints and Fed commentary for fresh directional cues.

Looking ahead, markets will monitor forthcoming US economic releases, central bank communications and developments in Treasury yields and risk sentiment for indications of whether the dollar’s current momentum will persist or change course.