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The dollar index (DXY00) today is down by -0.13%. The dollar is under pressure today as stocks rallied on a New York Times report that Iranian operatives made an offer to discuss terms for ending the war. The dollar recovered from its worst level today after the Feb ADP employment report showed US employers added more jobs than expected last month, and the Feb ISM services index unexpectedly expanded by the most in 3.5 years, hawkish factors for Fed policy.
The US Feb ADP employment change increased by +63,000, stronger than expectations of +50,000.
The US Feb ISM services index unexpectedly rose +2.3 to 56.1, better than expectations of a decline to 53.5 and the strongest pace of expansion in 3.5 years. The Feb ISM services prices paid sub-index unexpectedly fell -3.6 to an 11-month low of 63.0, weaker than expectations of an increase to 68.3.
Cleveland Fed President Beth Hammack said it’s important to drive inflation back to target and that “Fed policy could be on hold for quite some time.”
Swaps markets are discounting the odds at 2% for a -25 bp rate cut at the next policy meeting on March 17-18.
The dollar continues to see underlying weakness as the FOMC is expected to cut interest rates by about -37 bp in 2026, while the BOJ is expected to raise rates by another +25 bp in 2026, and the ECB is expected to leave rates unchanged in 2026.
EUR/USD (^EURUSD) today is up by +0.16%. Weakness in the dollar today is supporting gains in the euro. Also, today’s Eurozone economic reports, which showed that the Eurozone Jan PPI rose more than expected and the Jan unemployment rate unexpectedly fell to a record low, are hawkish for ECB policy and supportive of the euro.
Eurozone Jan PPI rose +0.7% m/m and fell -2.1% y/y, stronger than expectations of +0.2% m/m and -2.6% y/y.
The Eurozone Jan unemployment rate fell -0.2 to a record low of 6.1%, showing a stronger labor market than expectations of 6.2%.
Swaps are discounting a 0% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.
USD/JPY (^USDJPY) today is down by -0.30%. The yen is climbing against the dollar today after the Japan Feb consumer confidence index rose more than expected to a 6.75-year high. Also, today’s comments from Japanese Finance Minister Satsuki Katayama boosted the yen when he said the Japanese government could act to quell excessive currency moves, including through market intervention. In addition, today’s -3% plunge in the Nikkei Stock Index to a 3.5-week low sparked some safe-haven demand for the yen.
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