The US Dollar is entering a critical week as traders prepare for July inflation data following unexpectedly weak US employment figures. The weaker labor-market reading has encouraged markets to reassess the Federal Reserve’s policy outlook, leaving the Greenback vulnerable to further volatility as investors await fresh evidence on inflation.

The upcoming CPI report is expected to become one of the most important catalysts for FX markets this week. A softer inflation reading could reinforce expectations for a less restrictive Fed, potentially weighing on the Dollar, while stronger-than-expected inflation could revive expectations for tighter monetary policy.

The changing rate outlook is already influencing major currency pairs. Traders are closely monitoring EUR/USD, GBP/USD and USD/JPY as shifts in US Treasury yields and Fed expectations continue to drive Dollar flows.

Market focus: US CPI, Treasury yields and Fed rate expectations will remain the key drivers for the USD this week. Traders should prepare for increased volatility around the release and avoid excessive exposure during high-impact events.