Dollar rally pauses as Fed & US data disappoint

Following a strong run over the past month, the US dollar has weakened across the board this week after some softer-than-expected US data and a non-committal FOMC. Next week’s key data releases include the ISM manufacturing survey and the all-important non-farm payrolls report. We expect further disappointment on the data front, which could easily lead to a deeper retrenchment for the greenback. That said, its recent strength has been driven to a significant extent by worries about the spread of the “delta” variant and risks in China’s economy and financial system. Both remain wildcards that may keep the dollar strong near term.