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Investing.com - The U.S. dollar slipped lower Wednesday on declining trade optimism, amid caution ahead of key employment data which could provide clues of future Federal Reserve monetary policy decisions.
At 04:55 ET (08:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, dropped 0.2% to 99.002, remaining near its lowest level since late April, seen at the start of the week.
Dollar awaits more trade talks, jobs data
The Trump administration has given a Wednesday deadline for countries to submit their best offers on trade, but the president has also signed a doubling of duties to 50% on imported steel and aluminium.
There was also some optimism in Asia earlier Wednesday that Trump would call Chinese President Xi Jinping this week to provide some energy into trade talks after the two sides accused each other of violating the terms of an agreement last month to roll back some tariffs.
However, this was thrown into uncertainty Wednesday after he criticised the Chinese president in a social media post.
"I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!," Trump wrote in a post on his social media platform, Truth Social.
“Recently, such direct talks have eased trade pressures,” said analysts at ING, in a note, “and in our view, there is potential for a temporary uptick in the dollar after the event.”
Markets will have the chance to parse through private payrolls data later in the session that could shed further light on the impact of Trump’s tariff agenda on the American labor market, ahead of Friday’s all-important monthly nonfarm payrolls report.
Separate data on Tuesday from the U.S. Labor Department found that job openings grew in April, although layoffs increased, potentially indicating some softening in the labor market.
Euro gains despite weak eurozone PMIs
In Europe, EUR/USD traded 0.3% higher to 1.1399, not far removed from a six-week high, despite data showing eurozone business activity barely expanded in May.
The HCOB Eurozone Composite Purchasing Managers’ Index, compiled by S&P Global, fell to 50.2 in May from 50.4 in April, higher than a preliminary estimate of 49.5 but its weakest since February.
PMI readings above 50.0 indicate growth in activity, while those below point to a contraction.
“Our view on EUR/USD is unchanged: we think the pair can settle back close to 1.13 over the coming weeks, and that short-term rallies may still lose steam as they approach 1.150,” said ING.
The European Central Bank concludes its latest policy-setting meeting on Thursday, and is widely-expected to cut interest rates by a quarter point once more.
GBP/USD traded 0.2% higher to 1.3540, after Britain’s services sector returned to tepid growth last month after the sector shrank in April for the first time in a year and a half.
The S&P Global Purchasing Managers’ Index for Britain’s services sector rose to 50.9 in May from 49.0 in April, and above an earlier flash estimate of 50.2.
The upward revision also lifted the composite PMI, which includes the smaller manufacturing sector, taking it above the 50-level which divides growth from contraction.
Bank of Canada meeting due
Elsewhere, USD/JPY traded 0.1% lower to 143.90, while USD/CNY traded largely unchanged at 7.1877, as traders await news of trade talks between Trump and Chinese President Xi Jinping, potentially this week.
USD/CAD fell 0.1% to 1.3709, ahead of a policy-setting meeting of the Bank of Canada later in the session.
“We think this meeting is a coin toss. We are very marginally favouring a cut purely based on the economic justification, but admit that the BoC might send an excessively dovish signal by cutting when markets are pricing in only 5bp,” said ING.