The U.S. dollar index (DXY) was largely flat on Thursday, as it consolidated losses following a bearish reversal on Wednesday. Traders paused to digest a series of disappointing U.S. economic reports and renewed worries over trade talks with China. These factors have fueled fears of a possible recession.
Services and Manufacturing Data Signal Slowing Growth
On Thursday, the Institute for Supply Management (ISM) services PMI showed that business activity in the services sector fell for the first time in nearly a year. The index dropped to 49.9 in May, down from 51.6 in April, while analysts had expected a rise to 52.0. A reading below 50 indicates contraction.
This weak services report followed an equally disappointing manufacturing PMI and a larger-than-expected decline in factory orders. Together, these data points suggest that U.S. economic growth slowed sharply in the second quarter.
Earlier in the week, the ADP employment report revealed that private-sector job gains were limited to 37,000 in May, far below the forecast of 115,000. This shortfall cast doubt on the outlook for Friday’s non-farm payrolls (NFP) report and raised concerns about a slowdown in job growth.
Trade Uncertainty Adds to Dollar Pressure
Adding to the negative mood, U.S. President Donald Trump said it was “extremely difficult” to reach a trade deal with Chinese President Xi Jinping. Trump’s comments drew fresh attention to stalled negotiations and heightened uncertainty over tariffs. The prospect of prolonged trade tensions has weighed on market sentiment and further pressured the already weak dollar.
With mixed data and little clarity on trade, the DXY held near recent lows as investors awaited more signals on the direction of the U.S. economy and Federal Reserve policy.
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