A little over 48 hours after the US military operation in Venezuela, there are few marks left in the currency market. Early Monday’s flight into dollar safety proved very short-lived, as early signs of dialogue between the US and Maduro’s successor, Delcy Rodríguez, are reducing the perceived probability of another imminent US military action in the near future, ING's FX analyst Francesco Pesole notes.

US Dollar retreats from early gains

"Our early assessment of Venezuela’s impact on the dollar is neutral to slightly positive in the near term – higher geopolitical risk, but no major implications for the US and oil market – and skewed to the downside in the medium term, should markets find enough conviction to price in increased oil supply and take crude prices lower."

"The good performance of equities yesterday, despite geopolitical risk, was, in our view, the primary driver of the unwinding of earlier dollar gains; data also played a role. The US ISM manufacturing index dropped below 48 in December, marking a fourth consecutive monthly decline and the lowest level since October 2024. The backlog of orders also continued to shrink at 45.8, suggesting a risk of inventory build-up and potential employment hit in the months ahead."

"Despite the quick unwinding of safe-haven USD demand yesterday, we remain modestly biased to a stronger dollar in the near term. Seasonality is positive in January, and markets’ sanguine stance on geopolitics leaves risk assets and high-beta currencies exposed to re-escalations, both in Latam and potentially in Greenland."