USD: Data, not the Fed, in the driving seat for FX The dollar has ended the day lower on the last three consecutive Fed meetings. In effect, the market had bought into the Fed’s communication from those meetings that the disinflation trend was visible and the Fed wanted to cut. However, the dollar has rallied 2%+ since the Fed’s last meeting in March - confirming data supremacy in FX market pricing. And with both activity and price data heading in the wrong direction for the Fed over the last six weeks, it is hard to see Chair Jerome Powell on 1 May offering much resistance to a market that is minded to buy dollars. If the dollar is to go lower later this year, it will then have to be the data which drives it. We have recently seen the dollar selling off on the soft April US PMIs and we think there would be a good reaction lower should real sector activity finally slow or some new, reassuring signs of disinflation trends emerge. Until then, wide rate differentials, geopolitical risk and the uncertainty around the US November presidential election suggest the dollar can hold recent gains.