Dollar Falls Modestly Ahead of Employment Data and Prospective Trade Negotiations

The U.S. dollar edged lower on Wednesday amid fading optimism over trade negotiations and caution ahead of key employment data that could influence the Federal Reserve’s policy outlook.

As of 04:55 ET (08:55 GMT), the U.S. Dollar Index — which measures the greenback against six major currencies — fell 0.2% to 99.002, hovering near its lowest level since late April.

Cautious Sentiment on Trade and Jobs

Markets are watching for fresh developments in trade talks, as the Trump administration set a Wednesday deadline for new offers from trade partners. However, optimism was tempered after Trump criticized Chinese President Xi Jinping in a social media post, casting doubt over potential progress.

“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 on Truth Social.

Earlier in Asia, there had been some hope that Trump would speak with Xi this week to revive stalled negotiations. ING analysts noted that while recent high-level talks had briefly supported the dollar, “there is potential for a temporary uptick in the dollar after the event.”

Investors are also eyeing private payrolls data later today, which could offer clues about the U.S. labor market ahead of Friday’s crucial nonfarm payrolls report. Tuesday’s JOLTS data showed a rise in job openings but also an increase in layoffs — potentially signaling early signs of labor market softening.

Euro Rises Despite Weak PMIs

The euro climbed, with EUR/USD up 0.3% to 1.1399, near a six-week high, despite weaker-than-expected eurozone PMI data. The HCOB Eurozone Composite PMI dipped to 50.2 in May from 50.4 in April — its lowest since February — though it remained slightly above the 50.0 growth threshold.

“Our view on EUR/USD is unchanged: we think the pair can settle back close to 1.13 over the coming weeks,” said ING, adding that rallies may lose momentum approaching 1.150.

Markets now await the European Central Bank’s meeting on Thursday, with a widely expected 25-basis-point rate cut.

Sterling Gains as UK Services Rebound

The British pound also firmed, with GBP/USD up 0.2% at 1.3540, after data showed a modest rebound in the UK’s services sector. The S&P Global UK Services PMI rose to 50.9 in May from 49.0 in April, beating expectations and pushing the composite PMI back into expansion.

Loonie Steady Before BoC Decision

In other currency moves:

USD/CAD slipped 0.1% to 1.3709, ahead of the Bank of Canada’s policy meeting

USD/JPY dipped 0.1% to 143.90

USD/CNY was flat at 7.1877

“We think this meeting is a coin toss,” said ING. “We slightly favor a cut based on economic fundamentals but recognize that a surprise move could send an overly dovish signal, especially with markets pricing in just 5 basis points.”