on the vertical axis. The letters look okay because the step loss isn't happening during the cutting of the letters, but somewhere in between. Try lowering the vertical axis' velocity and acceleration; it will go a little slower but (hopefully) will be accurate. You might also check for stickyness or play in that axis - a little mechanical problem, like rust on a slide, can cause that, as well as a pulley or screw that's a little loose.
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