Dollar Rises on Strong U.S. Services Data, But Gains Limited by Trade Uncertainty

The U.S. dollar edged higher on Tuesday, supported by strong services sector data, but gains were capped by lingering uncertainty over U.S. trade policies.

Key Highlights:

• Dollar Index rose 0.1% to 104.000, near a three-week high.
• EUR/USD fell 0.2% to 1.0786, hitting its lowest level since early March.
• GBP/USD dropped 0.1% to 1.2913, touching a two-week low.
• USD/JPY climbed to 150.92 before retreating to 150.62, marking a three-week high.
• USD/CNY edged 0.1% higher to 7.2630, reflecting pressure on Asian currencies.

Factors Driving the Dollar’s Movement:

1. Strong U.S. Services Data Boosts Greenback

• The U.S. services sector showed resilience, as indicated by the S&P Global flash U.S. PMI.
• In contrast, Europe and Japan’s economic performance weakened, reinforcing dollar strength.
• ING analysts highlighted a widening gap between a struggling U.S. manufacturing sector and a rebounding services sector.

2. Market Focus on U.S. Consumer Confidence Data

• The Conference Board Consumer Confidence Index, due later today, is the biggest event for FX traders this week.
• Market sentiment toward the U.S. economy has been weighed down by soft consumer data, making this release a critical indicator.

3. Trump’s Trade Tariff Uncertainty Limits Dollar Gains

• Trump signaled that not all threatened tariffs will take effect on April 2, with some countries potentially receiving exemptions.
• Investors remain cautious as they await further clarity on the tariff plan, which could impact global trade and inflation.

Global FX Market Reactions:

Euro (EUR/USD) Hits Lowest Level Since March

• EUR/USD fell to 1.0786, weighed down by:
  • Weaker-than-expected German Ifo consumer sentiment data.
  • Monday’s disappointing European PMI results.
• Focus is now on Ukraine-Russia peace talks in Saudi Arabia, which could boost the euro if progress is made.

British Pound (GBP/USD) Falls Ahead of U.K. Budget Statement

• The pound fell to 1.2913 as traders await U.K. Chancellor Rachel Reeves’ spring statement on Wednesday.
• A downward revision in U.K. economic growth forecasts is expected, adding pressure on GBP.

Japanese Yen (USD/JPY) Slips to Three-Week Low

• USD/JPY reached 150.92 before pulling back to 150.62, following disappointing Japanese factory data.
• A stronger dollar and risk-off sentiment kept pressure on the yen.

Chinese Yuan (USD/CNY) Under Pressure

• USD/CNY edged up 0.1% to 7.2630, as Asian currencies remained subdued amid concerns over U.S. trade tariffs.

Market Outlook:

• The U.S. dollar’s strength is driven by resilient services data but faces headwinds from trade policy uncertainty.
• Upcoming U.S. consumer confidence data and further tariff updates will be key for FX traders.
• A breakthrough in Ukraine-Russia peace talks could support the euro.
• Asian currencies may remain under pressure as U.S. trade policy developments unfold.