Dollar resumes its rally on the back of strong US data

The US dollar is ending the week higher against most currencies, extending its gains alongside rising US Treasury yields following the stronger-than-expected July payrolls data. With Fed officials earlier this week suggesting that several more months of strong economic data may be enough to start tapering asset purchases, next week’s US inflation data could reinforce expectations that policy normalisation may not be far off. Although we think that the pace of the economic recovery in the US will moderate in the coming quarters, our view is that the dollar will rally further as underlying growth and inflation in the US remain stronger than in most other major economies.