The dollar index fell on Wednesday after ADP employment data under performed even the lowest forecasts, leading markets to brace for a potentially disappointing non-farm payrolls report at the end of the week.
The 374k rise in employment came in below the Reuters forecast range of 400k to 850k, leaving the dollar index down 0.21% at 92.46% in late trade after starting the U.S. session near flat.
Following ADP, dollar weakness was further exacerbated by weak ISM employment, which fell to a contractionary 49 while prices eased to 79.4, below the Reuters consensus forecast of 83.8, though the overall index unexpectedly rose to a robust 59.9.
The weak ADP and ISM employment data may be seen as supporting Fed Chair Jerome Powell's transitory view of inflation and remaining caution on removing accommodation until employment shows more progress.
Thursday’s claims data and Friday’s payrolls release will be scrutinized for indications of how soon the Fed may be comfortable reducing asset purchases.
EUR/USD led major currencies higher as ECB president Christine Lagarde and Bundesbank President Jens Weidman sounded somewhat hawkish tones.
Lagarde argued for targeted stimulus while Weidmann said the ECB should not lock in very loose monetary policy for too long.
EUR/USD rose 0.29% to 1.1843, a touch below its four-week high by 1.1857.
A close above 1.1857 would target the July 30 high at 1.1909.
USD/JPY slid off early U.S. highs by 110.42 to near flat on the session at 109.99, after the U.S. data misses dialed back Fed asset taper expectations.
With the BOJ alone in maintaining pandemic-era accommodation, current USD/JPY weakness could be transitory.
Upside targets are 110.61, the upper 21-day Bolli, and 110.80, the Aug. 11 high.
GBP/USD was up 0.18% at 1.3780, within the daily cloud, adding to bullish expectations.
BoE hike expectation for H1 2022 have been supporting sterling as the Fed dithers on asset tapering.
AUD/USD rallied 0.83% to 0.7375, peeking above 10-WMA resistance at 0.7368, which hints at further gains in the offing. A rise above 0.7499, the 50% Fib of 0.7891-0.7107, would shift momentum to bulls.
Treasuries were flat.
Bitcoin rallied, trading at $48.7k and eyeing significant resistance near $50k.
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