Dollar Undercut as Stocks Rebound

Economic Indicators - The US February ADP employment change increased by +63,000, surpassing expectations of +50,000 [2] - The February ISM services index unexpectedly rose by +2.3 to 56.1, exceeding expectations of a decline to 53.5, marking the strongest pace of expansion in 3.5 years [3] - The February ISM services prices paid sub-index unexpectedly fell by -3.6 to an 11-month low of 63.0, contrary to expectations of an increase to 68.3 [3] Federal Reserve Insights - The Fed Beige Book indicated that seven of the twelve Fed districts reported slight to moderate economic activity increases, with moderate price rises and generally stable employment levels [4] - Cleveland Fed President Beth Hammack emphasized the importance of driving inflation back to target, suggesting that Fed policy could remain on hold for an extended period [4] - Swaps markets are pricing in a 4% chance of a -25 basis point rate cut at the next policy meeting on March 17-18 [4] Currency Market Dynamics - The dollar index (DXY00) fell by -0.29% on Wednesday, influenced by a rally in stocks following a report on potential discussions to end the war involving Iranian operatives [1] - The dollar showed signs of recovery after the positive employment report and ISM services index, which are considered hawkish for Fed policy [1] - The dollar is expected to experience underlying weakness, with projections indicating a -37 basis point interest rate cut by the Fed in 2026 [5] Eurozone Economic Performance - The euro (EUR/USD) rose by +0.23% on Wednesday, supported by the dollar's weakness and positive Eurozone economic reports [6] - Eurozone January PPI rose by +0.7% month-over-month and fell by -2.1% year-over-year, outperforming expectations [6] - The Eurozone January unemployment rate fell by -0.2 to a record low of 6.1%, better than the expected rate of 6.2% [7] - Swaps are indicating a 2% chance of a +25 basis point rate hike by the ECB at its next policy meeting on March 19 [7]