ING’s Francesco Pesole notes that softer US jobs data has weakened the Dollar but does not expect this alone to extend USD losses. He argues the report curbs hopes for two Federal Reserve hikes but is not weak enough for a major dovish repricing. ING expects DXY to stabilise in a 100.0-101.5 range in coming weeks, with thin US holiday liquidity raising intervention risks.

ING sees DXY stabilising near term

"Softer US jobs data has weakened the dollar, but we do not see this as sufficient to extend USD losses on its own. We look for near-term stabilisation in DXY. Thin liquidity around the US holiday today and Monday increases the risk of JPY intervention, with an initial round that may already have occurred yesterday morning."

"Overall, the report makes it harder for markets to rebuild expectations of two Federal Reserve rate hikes. At the same time, it is not weak enough on its own to trigger significant dovish repricing."

"Despite yesterday’s front-end correction, more than 25bp remains priced into the December contract, and markets can still hold on to expectations of at least one hike into the 14 July CPI release."

"While the data supports our bearish USD view for the second half of the year, we do not see the greenback entering a sustained downtrend yet. Instead, DXY may stabilise in the 100.0-101.5 range over the coming weeks."

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