The U.S. dollar eased marginally on Wednesday, consolidating near its recent multi-month highs as investors awaited fresh labor market data for direction. The greenback remained underpinned by safe-haven demand and fading expectations for additional Federal Reserve rate cuts this year.
At 04:25 ET (09:25 GMT), the Dollar Index — which tracks the currency against six major peers — slipped 0.1% to 100.002, after touching its strongest level since April 1 during Tuesday’s trade.
Focus Turns to ADP Employment Report
The dollar’s recent strength has been fueled by renewed risk aversion following a sharp sell-off in technology shares on Wall Street, as concerns about excessive stock valuations prompted investors to rotate into defensive assets. Momentum also followed last week’s Fed rate cut, which Chair Jerome Powell indicated could mark the final move of the year.
“A more defensive mood has gripped global markets and FX this week,” said analysts at ING. “FX markets are reflecting this nervousness, with high beta currencies under pressure and the dollar generally bid.”
Investor visibility remains limited amid the ongoing U.S. government shutdown, which has halted the release of key economic indicators. That’s left markets increasingly reliant on today’s ADP private payrolls report for insight into the health of the U.S. labor market.
“An on-consensus reading today probably keeps the dollar supported, given that it would maintain doubts about whether the Fed cuts again in December,” ING added.
Euro Gains on Strong German Data
The euro edged higher, with EUR/USD up 0.1% to 1.1488, recovering slightly from Tuesday’s three-month low. Germany’s latest economic indicators surprised to the upside — industrial orders rose 1.1% in September, while the services sector recorded its fastest growth in more than two years. The final HCOB Germany services PMI came in at 54.6 in October, up from 51.5 the previous month.
“EUR/USD has some support at 1.1450 and let’s see what the ADP data has to offer today,” noted ING.
Meanwhile, sterling also ticked up, with GBP/USD gaining 0.2% to 1.3041. The pound remained subdued, however, after UK finance minister Rachel Reeves signaled potential broad-based tax increases in her upcoming budget statement later this month.
Yen Strengthens as BoJ Considers Rate Hike
In Asia, the yen firmed slightly, with USD/JPY down 0.1% to 153.54 after the release of minutes from the Bank of Japan’s September meeting. The minutes revealed that several policymakers see conditions aligning for an eventual rate increase, with two members even voting for an immediate hike — a stance they repeated at the October meeting.
Although the BoJ has held interest rates steady through both September and October, it reiterated its expectation of tightening policy once inflation and growth show sustained improvement.
Elsewhere, USD/CNY slipped 0.1% to 7.1254 after data from a private PMI survey indicated a modestly stronger expansion in China’s services sector during October. The Australian dollar was little changed, with AUD/USD trading flat at 0.6492 despite softer-than-expected PMI data for the same period.