US Dollar: Upside risks persist – ING

ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner note that a sharp USD/JPY move briefly weighed on the Dollar, but only Australian Dollar and Canadian Dollar held gains. With US ISM services at 54.1 expected and September Fed hike odds only slightly lower, Pesole still prefers Dollar upside, supported by front-end rates and higher energy prices.

Fed risks keep Dollar supported

"A sharp jump in the yen yesterday, potentially due to another intervention, had a knock-on negative impact on the dollar across the board. But towards the end of the session, only currencies backed by positive domestic stories (AUD, CAD) had hung onto gains, with the move fading elsewhere."

"On the data side, ADP payrolls came in at 38k, leaving few marks. Market conviction on a September hike decreased slightly yesterday, with pricing declining from 18bp to 15bp, but that was likely due to the oil rally stalling."

"Today, the ISM services report is in focus, and expected to flatten at 54.1. The bar to drive the Fed away from a September hike looks fairly high, especially for second-tier data."

"We retain a preference for the upside in the dollar, as front-end rates and higher energy prices both point up."

"The main risk remains that higher back-end yields can prompt more interventionism by the Treasury and a revamp of the debasement trade."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)