Brief pause on dollar rally

The USD will probably remain on the sidelines during the next few weeks as markets continue digesting last week's FOMC's statement which was considered somewhat more dovish than anticipated. The Fed will refrain from hiking this year as uncertainty in global financial markets will not disappear anytime soon. Although we could see some retracement in volatility, the secular downtrend in economic activity and the opacity of FX policy in China will continue weighing in emerging markets and commodity currencies. For G3 currencies, the EUR should lead the way down as more easing comes through before year-end.

In terms of economic data, the week ahead will be quiet. Existing home sales on Monday are expected to raise 5.53M saar, durable goods orders ex transportation to stay flat on Thursday, while the second reading of 2Q15 GDP will likely show a 3.7% q/q saar on Friday.