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US Dollar Trades to the Downside on Weak Service Data

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US Dollar Trades to the Downside on Weak Service Data

The US dollar traded to the downside against the safe haven rivals after the US barometer of service activity fell to the lowest level in six months.

The US service economy ended the year on a sour note, as seasonal volatility and bad weather kept business activity from expanding in half of the service sectors. The Institute for Supply Management’s Non-Manufacturing PMI fell from 53.9 to 53.0 in December, with declines in mining and entertainment offsetting gains in retail and financial services.

Meanwhile, November factory orders expanded at a monthly rate of 1.8 percent in November, in-line with estimates, according to the Census Bureau. New orders increased 3.2 percent to $241.6 billion after contracting 0.7 percent the prior month.

The greenback pared back half a percent against the Japanese yen, bouncing from the 103.90 support. The USDJPY pair consolidated at 104.23.

The euro gained 39 pips against the greenback, settling at 1.3632 US, despite a relatively mixed bag of PMI data courtesy of Markit Group. The Eurozone’s service economy expanded at the slowest pace in four months. Service activity declined in France and Italy, before expanding at the fastest pace in 77 months in Spain.

In North America, the US dollar regained its footing against the loonie after Canadian Finance Minister Jim Flaherty remarked the nation’s manufacturers may soon be supported by a weaker Canadian dollar. The USDCAD jumped 19 pips to 1.0653.

Market participants will have a clearer indication of whether the Federal Reserve will fast-track stimulus cuts later in the week with the release of December nonfarm payrolls data. Stronger than forecasted job growth over the past two months gave the Fed the impetus to scale back the monthly pace of asset purchases to $75 billion.

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