MUFG Research sees a scope for further USD weakness in the near-term.
"With recent data like the wage data in the NFP, the ISM services and the NFIB, it is hard to envisage a notable jump in rates and the US dollar over the short-term. Of course the CPI tomorrow will be key as always but the signs are that the data once again will be consistent with easing inflation pressures. No amount of hawkish rhetoric will be sufficient to shift the market view that the Fed only has about 50bps of tightening left before a pause is justified – a 25bp hike in Feb and again in March," MUFG notes.
"Much of this is likely now captured in FX levels given the scale of the dollar sell-off since the start of Q4 but the short-term risks still seem skewed to the downside," MUFG adds.