TD Research sees a scope for the USD to consolidate, and for GBP to outperform in the near-term.
"The USD continues to retreat following a much softer payrolls report. One consequence of this disappointment is that it may shift the FX conversation about nascent inflation pressures to enduring slack in the US economy. Indeed, fed funds expectations have undergone a dovish repricing since the data," TD notes.
"This should leave the USD in a consolidative tone until data suggests that the April's payrolls was a temporary aberration. If anything, it should redirect focus to currencies where central banks have undergone a 'hawkish' pivot to perform vs. the USD. This includes CAD, NOK and now GBP. We think cable is in price discovery mode that leans topside," TD adds.