Dollar slips with focus on trade tensions and economic data

The dollar slipped against most major currencies on Wednesday as investors monitored developments in President Donald Trump’s tariff negotiations with key trading partners, especially China, ahead of a batch of economic data, Reuters reported.

The Trump administration has given a deadline of Wednesday for countries to submit their best offers on trade, the same day duties on imported steel and aluminium have doubled.

Trump is also tipped by the White House to have a call this week with Chinese President Xi Jinping, after the two sides accused each other of violating the terms of an agreement last month to roll back some tariffs.

“What happened was that the market was quite relaxed about U.S. and China until we heard the sort of ramping up of rhetoric from Trump at the end of last week,” said Fiona Cincotta, City Index’s senior markets analyst.

“That has really put the focus back on this call and the market will be looking for a sense that the two leaders are at least getting towards the same page.”

Trump on Wednesday posted on his social media platform that Xi was “tough” and “hard to make a deal with.”

In the meantime, economic indicators have returned as a driver of the U.S. currency this week, even if trade frictions remain centre stage. The dollar fell 0.8% against major peers on Monday following a contraction in manufacturing, only to rebound by almost the same amount the next day after a surprise increase in U.S. job openings.

The dollar was steady against the Japanese yen at 143.95 yen as of 0735 GMT, while against the Swiss franc it edged 0.16% lower to 0.8228 francs.

The euro rose 0.21% to $1.1395 ahead of the European Central Bank’s decision on interest rates expected on Thursday.

Sterling inched up 0.14% to $1.3539. The UK and its metal exports are exempt from the increased U.S. duties, given Britain has a trade deal in place.

The dollar index, which measures the currency against six others, was flat at 99.12, not far from its late April low.

FOCUS ON ECONOMIC HEALTH

Sentiment overall has been buoyed by data that analysts say is yet to reflect the full damage of trade uncertainty. Traders will keep a close eye on May business activity data out of the UK and the euro zone economies, along with a closely watched ISM services sector report out of the U.S.

The ADP employment report later in the day could be an indication of the health of the U.S. private sector in the run-up to the crucial monthly payrolls figures on Friday.

Elsewhere, the Australian dollar edged up 0.12% to $0.647 following GDP figures that showed the economy barely grew in the first quarter, underlining the need for additional stimulus.

The Canadian dollar was flat at C$1.3714 versus its U.S. peer. The Bank of Canada is likely to hold interest rates steady later on.

Both Canada and Mexico are exposed to the higher U.S. tariffs on industrial metals. Mexico’s peso was steady.

China’s yuan was steady at 7.1886 per dollar in offshore trading.

South Korea’s won strengthened about 0.9% to 1,365.4 per dollar after the victory of liberal candidate Lee Jae-myung in the country’s presidential election.