The U.S. Dollar is seen retracing from its highest level across various major currency pairs, but the market still lacks catalysts.

Several US economic data releases last night showed disappointing figures. As a result, the US dollar weakened. The US Dollar Index (DXY) corrected to the 106.70s in Thursday's (October 5th) Asian session, and the greenback retreated slightly against various other major currencies.

us dollar index

The ADP Employment Report shows weakness in private payroll data in the United States. It decreased from 180k in August to 89k in September, while the consensus only anticipated a drop to 153k.

The S&P report revealed a setback in the US service sector. The Purchasing Managers' Index (PMI) score for this sector declined from 50.5 to 50.1 in September 2023, just slightly below the consensus estimate of 50.2. The ISM report on the US non-manufacturing sector met expectations but was also uninspiring.

The Non-Manufacturing PMI score weakened from 54.5 to 53.6 in September 2023, with the Employment sub-index dropping from 54.7 to 53.4.

This series of reports raises concerns about the upcoming release of US Non-Farm Payroll data. The interim consensus expects NFP to only weaken from 187k in August to 163k in September. Still, the decline in ADP and Non-Manufacturing ISM employment data opens the possibility of a sharper decline.

Karl Schamotta, Chief Market Strategist at Corpay, stated that the service sector data released in the morning had contributed to moderating expectations ahead of the Non-Farm Payroll report on Friday.

He also noted that there had been a minor setback in the probability of the Federal Reserve implementing additional interest rate hikes before the end of the year. In a broader context, he mentioned that the increase in Treasury yields and the dollar's strength seemed to have peaked, as reported by Reuters.

The US dollar is retracing from its highest levels against major currency pairs, but the market still lacks catalysts for more significant trend changes. The market seems to be entering a wait-and-see mode ahead of tomorrow's Non-Farm Payroll release in the US.

USD/JPY is trading within a very narrow range around 149.00, indicating market reluctance to touch the controversial 150.00 threshold. GBP/USD and EUR/USD show slight fluctuations near multi-month lows. AUD/USD and NZD/USD are also attempting to inch higher but remain constrained near their respective lowest levels since November 2022 due to more dovish central bank decisions this week.