Dollar Volatility Persists Amid Intervention Fears and Hawkish Pricing

The foreign exchange space is still reeling from yesterday's sharp move, which has sparked concerns of intervention. Today's calendar includes key data releases that will test hawkish pricing in major currencies.

The US dollar saw a negative impact across the board due to the yen's sharp jump, but currencies with positive domestic stories managed to hold onto gains. The ISM services report is expected to be released today and is seen as a crucial indicator of the Fed's decision on interest rates.

Our team believes that risks are tilted in favor of an upside for the dollar, despite the recent volatility. We expect front-end rates and higher energy prices to continue supporting the dollar, but warn that higher back-end yields could prompt intervention by the Treasury.