Last week’s Dollar softness was mostly down to weak ISM and claims data, and a downside surprise to core CPI for example (the market looks for +0.4% MoM) could shake up sentiment, as could a second week of climbing claims and/or a soft retail sales print. 

Absent any signs of weakness in the US data, I struggle to see how the Euro gets much of a lift from an as-expected 25 bps rate hike – even one accompanied by a very clear signal that there is more to come from the ECB. 

But if the data were to provide support for the idea that the US economy is slowing, the fact that 2-year note yields are almost 20 bps higher than they were just before the payroll data 10 days ago, suggests there’s room for yields and the Dollar to drop back.