Dollar slips from highs; ADP data looms large

Investing.com - The U.S. dollar slipped marginally lower Wednesday, but remained close to multi-month highs, supported both by haven flows and declining bets for near-term Federal Reserve interest rate cuts.

At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 100.002, after touching its highest level since April 1 later Tuesday.

ADP data looms large

The safe-haven dollar received a boost during the previous session after the tech-led sell-off on Wall Street on worries about stretched valuations.

The U.S. currency had already been on the rise after the Federal Reserve cut rates last week but Chair Jerome Powell suggested that might be the last cut of the year. 

“A more defensive mood has gripped global markets and FX this week,” said analysts at ING, in a note. “FX markets are reflecting this nervousness, with high beta currencies under pressure and the dollar generally bid.”

Traders are also having to make calls largely in the dark given a record-long government shutdown, which has all but halted the flow of macroeconomic data. This has put a lot of focus on the private ADP payrolls later in the session.

“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 pushes higher

In Europe, EUR/USD gained 0.1% to 1.1488, after the pair slipped to a three- month low during the prior session.

German industrial orders climbed more than expected in September, increasing by 1.1% from the previous month, while the eurozone’s largest economy saw its services sector record its fastest growth in more than two years in October. 

The final HCOB Germany services PMI rose to 54.6 in October, still in expansion territory after a slightly lower reading of 51.5 in September.

“EUR/USD has some support at 1.1450 and let’s see what the ADP data has to offer today,” said ING.

GBP/USD gained 0.2% to 1.3041, but remained pinned near a seven-month low after British finance minister Rachel Reeves on Tuesday hinted at broad tax rises in her budget later this month.

Yen gains after BoJ minutes 

In Asia, USD/JPY traded 0.1% lower to 153.54, after the minutes of the Bank of Japan’s September meeting showed policymakers were considering a potential interest rate hike in the coming months. 

Several policymakers saw conditions falling into place for interest rates to rise, with two members having voted during the meeting for an immediate rate hike, the minutes showed. The same two members had also called for a hike in October’s meeting. 

The BOJ had left interest rates unchanged during its September meeting and October meetings, but had reiterated its outlook that rates would rise as inflation and economic growth picked up. 

USD/CNY traded 0.1% lower to 7.1254 after private purchasing managers index data showed the country’s services sector grew a touch more than expected in October. 

AUD/USD traded largely unchanged at 0.6492 despite slightly softer-than-expected October PMI data.