ADP payroll figures were good enough (42k vs 30k consensus) to keep markets in guessing mode about December's Fed cut. ISM services were also stronger than expected. The US Dollar (USD) reaction was interestingly quite muted and was followed by a correction overnight. We read this as a signal that markets were already pricing in a good deal of positives in the USD, and that part of the dollar rally over the past couple of days was due to safe haven flows amid equity instability, ING's FX analyst Francesco Pesole notes.

Tariffs likely to stay regardless of the ruling

"The dollar has clearly re-established some safe haven appeal, meaning more equity corrections can still benefit USD against activity currencies. But the yen remains the preferred defensive tool in FX now. Japanese officials have continued to test the waters with verbal intervention, but without follow-through, such efforts tend to lose impact over time. If some risk-off fails to come to the rescue for the yen, expect more upward USD/JPY speculation to test the Bank of Japan's tolerance band (with 155.0 as the obvious target)."

"While we note signs that the dollar rally is running out of steam, it’s equally true that markets are lacking a compelling story to rebuild dollar shorts. The lack of data and a cautious Fed communication means there aren't many in sight. We expect some rangebound trading today, with lingering risks of correction in the dollar based on short-term overvaluation. We also have Challenger job cuts data today, which could surprise on the negative side for the dollar and add fuel to the correction."

"Finally, the Supreme Court’s review of the Trump administration’s tariffs is drawing significant attention. Our baseline is that tariffs will stay regardless of the ruling."