The impact of the Venezuelan shock has largely faded, with oil, equities, and FX markets reverting to pre-January levels as investors step back from trading geopolitical headlines. Attention now turns to US data, where ADP and JOLTS carry downside risks for the dollar despite a neutral-to-slightly bullish near-term USD outlook, ING's FX analyst Francesco Pesole notes.

Dollar firms on seasonality, not geopolitics

"The Venezuelan shock has largely faded. Oil softened yesterday but remains near pre‑4 January levels, equities extended gains, and FX markets have turned away from geopolitics. This reflects the post‑'Liberation Day' reluctance to trade the headlines and lean to more sanguine views."

"The dollar regained some ground yesterday – but that is probably due to some seasonal inflows and a modest uptick in front-end swap rates rather than geopolitics. Unless the US escalates threats on Greenland or intervenes again in Venezuela, markets should refocus on data in the second half of the week."

"Today, ISM services are expected to come in soft, but it will probably be ADP (consensus 50k) and JOLTS job surveys driving price action. Interestingly, ADP payrolls undershot consensus in seven of the last 10 prints, and given our dovish view on the US jobs market, we are inclined to see US jobs data events as bearing asymmetrical downside risks for the dollar. Beyond today, our short-term view remains neutral to slightly bullish on the greenback."