The US Dollar (USD) suffered a sharp decline on Wednesday. Antje Praefcke, FX Analyst at Commerzbank, analyzes Greenback’s outlook.
The USD’s upside potential is likely to be slowly exhausted, as it would take surprisingly good data – which has not been published recently – to give the Dollar an additional boost.
At the same time, the image of a soft landing for the US economy has begun to crack. This is why weaker-than-expected figures are likely to weigh more strongly on the Dollar than positive data provide support.
Wednesday’s ADP index was slightly below expectations, while the previous month was revised slightly upwards. No reason for a big move in the Dollar. I see this more likely on Friday, should the labor market report for February surprise. But again I would expect an asymmetric reaction in the Dollar: that the picture of a soft landing will be more cracked in the event of weak data and the USD will therefore come under more pressure than a strong labor market report could boost it.
