The near-term performance of the Dollar is tied to both Fed monetary policy expectations and global growth performance.

The data coming up remain key – PCE inflation, the ISMs and NFP and the CPI data and we still see scope for that data offering the leeway for the Fed to maintain its pause. But if that is the case, the selling of the Dollar will be curtailed by falling inflation elsewhere (Australia and Italy yesterday) and by growth uncertainties (China) or signs of higher rates impacting the real economy (UK). 

We continue to expect that these opposing forces will keep FX rates in ranges but accept stronger US data next week may alter that dynamic and see the US Dollar outperform.