FXStreet (Bali) - The US Dollar's price action in the last two days is telling, communicating further appreciation for the months ahead, notes Nomura.

Key Quotes

"After trading essentially sideways since early April, the Dollar has suddenly broken out on a broad basis, and is trading stronger on a global basis."

"While the Fed has yet to say anything materially new, we are entering a crucial period for Fed communication: First, the US data is showing clear signs of strength as we enter the second half. The very strong GDP release for Q2 was just the latest evidence of this strength. Second, various Fed speakers, including Williams, Bullard, and Fisher, etc, have recently sounded more hawkish than the tone we have heard from Yellen in her recent statements. And Plosser's dissent to the FOMC statement today is another example of this. Third, we are getting close to the end of the Fed's asset purchases (set to end by October)."

"Signals from the Fed could change materially during the August-October period, and there is an increasing risk that we could see a quite different tone expressed at the September meeting. Such a shift in Fed signaling matters greatly for the Dollar, for US short rates, and for global markets more broadly."

"We think the Dollar price action in recent days is a signal of what is in store for the period August to October. Most likely, Dollar gains will accelerate over that period if the US data continues to come in healthy and confirm that the underlying trend has improved."

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