Calm in FX markets lowers the bar for further dollar strength

The dollar has remained roughly unchanged against most major currencies over the past two weeks. Given that our expectations for upcoming data releases and central bank meetings – notably, nonfarm payrolls and the ECB meeting next week – are not far from consensus, we suspect the dollar will remain rangebound over the next couple of weeks. That said, volatility in FX (and other) markets is nearing multi-decade lows, which suggests to us that risks to this rangebound view are skewed towards a stronger dollar in the event of a major data surprise or a pullback in “risky” assets.