2021.08.0415:06:00UTC+00Dollar Depreciates As Weak ADP Data Cements Hopes For Easy Policy Stance

The U.S. dollar declined against its major counterparts in the European session on Wednesday, as ADP private sector employment rose much less than expected in July, backing hopes that the U.S. Federal Reserve will stick with its accommodative policy for the foreseeable future.

Data from payroll processor ADP showed that private sector employment rose by 330,000 jobs in July after surging by a downwardly revised 680,000 jobs in June.

Economists had expected private sector employment to spike by 695,000 jobs compared to the jump of 692,000 jobs originally reported for the previous month.

The ADP data serves a precursor to much anticipated nonfarm payrolls data, which will be released on Friday.

U.S. employment is expected to increase by 880,000 jobs in July after an increase of 850,000 jobs in June. The unemployment rate is seen falling to 5.7 percent from 5.9 percent.

The dollar showed mixed performance against its key counterparts in the Asian session. While it fell against the euro and the pound, it was steady against the yen and the franc.

The greenback dropped to a 2-day low of 1.1896 against the euro, down from a 6-day high of 1.1842 seen at 4:30 am ET. The pair was worth 1.1863 when it closed deals on Tuesday. The greenback may challenge support around the 1.20 area.

Final data from IHS Markit showed that the euro area private sector grew the most in more than 15 years in July, underpinned by steep manufacturing output growth and an accelerated expansion of services activity.

The composite output index rose to 60.2 in July from 59.5 in the previous month. But the reading was below the flash score of 60.6.

The greenback declined to a 1-1/2-month low of 0.9019 against the franc, after rising to a 2-day high of 0.9061 at 4:30 am ET. At yesterday's trading close, the pair was quoted at 0.9036. Immediate support for the dollar is seen near the 0.88 level.

The greenback weakened to its lowest level since May 26 against the yen, at 108.72. The pair had closed Tuesday's deals at 109.02. Should the greenback falls further, 107 is likely seen as its next support level.

The latest survey from Jibun Bank showed that Japan service sector continued to contract in July, and at a faster rate, with a services PMI score of 47.4.

That's down from 48.0 in June and it moves further beneath the boom-or-bust line of 50 that separates expansion from contraction.

The greenback was down against the pound, at a 5-day low of 1.3958. The pound-greenback pair had ended yesterday's trading session at 1.3914. The currency is likely to face support around the 1.41 region, if it falls again.

Final survey results from IHS Markit showed that UK service sector activity grew at the slowest pace since the end of the winter lockdown as staff shortages and supply issues weighed on business capacity.

The Chartered Institute of Procurement & Supply services Purchasing Managers' Index declined to 59.6 in July from 62.4 in June. The index was the lowest since March.

The greenback extended its fall to near a 3-week low of 0.7427 against the aussie and a fresh 4-week low of 0.7089 against the kiwi, from Tuesday's closing values of 0.7394 and 0.7016, respectively. Immediate support for the currency is likely seen around 0.78 against the aussie and 0.72 against the kiwi.

The greenback was trading at 1.2523 against the loonie, down from yesterday's close of 1.2535. Further fall in the currency may challenge support around the 1.21 level.