2023.02.0115:32:00UTC+00U.S. Dollar Declines On Weak ADP Data; Fed Decision In Focus

The U.S. dollar fell against its major counterparts in the New York session on Wednesday, as the nation's private sector job growth slowed more than expected in January and investors awaited the Federal Reserve's policy decision for more signals on future rate hike path.

Data from payroll processor ADP showed that private sector employment climbed by 106,000 jobs in January after surging by an upwardly revised 253,000 jobs in December.

Economists had expected private sector employment to increase by 178,000 jobs compared to the addition of 235,000 jobs originally reported for the previous month.

The Fed's policy decision is due at 2 pm ET and markets expect a 25 basis point increase in interest rates to a range of 4.50 percent to 4.75 percent.

Investors focus on the accompanying statement for clues about the outlook for further rate hikes.

The greenback weakened to a 2-day low of 1.0910 against the euro from yesterday's close of 1.0861. The greenback is likely to find support around the 1.12 region.

Flash data from Eurostat showed that Eurozone consumer prices rose at the slowest pace in eight months in January.

Inflation slowed more-than-expected to 8.5 percent in January from 9.2 percent in December. Prices were expected to climb 9.0 percent. This was the lowest rate since May 2022.

The USD/JPY pair dropped to a 2-day low of 129.31 from Tuesday's closing value of 130.06. If the greenback extends decline, 117.00 is likely seen as its next support level.

Survey from Jibun Bank showed that Japan manufacturing sector continued to contract in January, and at a steady pace, with a manufacturing PMI score of 48.9.

That's unchanged from the December reading and remains beneath the boom-or-bust line of 50 that separates expansion from contraction.

The USD/CHF pair touched 0.9143, its lowest level since January 20. At yesterday's trading close, the pair was quoted at 0.9153. The greenback is seen facing support around the 0.90 level.

The greenback slipped to 1.2344 against the pound, down from Tuesday's close of 1.2318. The greenback may face support around the 1.27 region, should it falls again.

Data from the British Retail Consortium showed that UK shop price inflation hit a record high in January as retailers offered fewer discounts amid rising input costs.

The BRC- NielsenIQ shop price index rose 8.0 percent on a yearly basis in January following a 7.3 percent gain in December.

Extending early decline, the greenback fell to a 2-day low of 0.7093 against the aussie. The greenback was worth 0.7054 per aussie at Tuesday's New York session close. The currency may possibly face support around the 0.72 mark.

The greenback was trading at 0.6459 against the kiwi, marginally down from the previous close of 0.6438. Next near term support for the currency is seen around the 0.66 level.

In contrast, the greenback held steady against the loonie, after recovering from a 2-1/2-month low of 1.3288 seen in the early European session. The greenback was trading at 1.3304 against the loonie at yesterday's close.

At 2:00 pm ET, the Fed announces its decision on interest rate. Economists widely expect the Fed to raise rates by 25 basis points to a range of 4.50 percent to 4.75 percent.