The US Dollar (USD) is ending the week mixed to slightly firmer overall though the broader trend in the DXY remains soft and sentiment retains a bearish undertone, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD mixed versus to slightly firmer vs majors

"With no US data reports today, market focus may be shifting to next week’s inflation reports from the US which may show an uptick in Y/Y CPI. Sticky inflation might ordinarily reduce expectations of easier Fed policy in the near term and give the USD a lift. But that may not be the case next week. Reports yesterday suggested that dovish Governor Waller is the “Trump team’s” preferred replacement for Chair Powell."

"Additionally, we learned that the White House was preparing to nominate CEA Chair Miran to the Fed board for the remainder of Governor Kugler’s term (through January 2026). That was a little surprising for markets. The decision to go with Miran (subject to Senate approval) as a temporary stopgap allows the president more time to assess potential replacements for Fed Chair Powell. But it does put a key ally of the president on the FOMC to bolster the argument of lower rates in the short run and strengthen market betting on a September Fed ease."

"Lower short-term rates and a steeper yield curve will add to USD headwinds. There are no US data reports this morning. St Louis Fed President Musalem speaks at 10.20ET and, as a relatively hawkish voting member of the FOMC this year, his comments will command attention from markets trying to assess how much impact the weak NFP data have had on Fed thinking about the policy outlook."