The US dollar has staged a rebound over the past week. US yield surge will keep USD supported ahead of CPI data, economists at MUFG Bank report.

Blow-out NFP report pushes back expectations for dovish Fed pivot

“The NFP report surprisingly revealed that employment growth surged higher by 528K in July. Leading indicators continue to signal that employment growth is likely to slow sharply later this year, but for now, the robust pace of employment growth combined with more evidence of stronger average hourly earnings growth (+0.5% MoM) in July keeps pressure on the Fed to keep raising rates further into restrictive territory above 3.00%.”

“Renewed upward pressure on short-term US yields should encourage an even a stronger US dollar. We believe there is room for the US dollar to rebound further in the near-term.”