U.S. Dollar Falls to Two-Month Low Amid Weaker Economic Data

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The U.S. dollar is having a tough time of it lately, folks. In choppy trading on Tuesday, the currency tumbled to a two-month low, driven by weak economic data and investor concerns that the Federal Reserve is done with its tightening cycle. And as other central banks around the world continue to raise interest rates to combat inflation, the greenback is losing ground.

Job Openings and Factory Orders Responsible for the Decline in the U.S. Dollar

One of the culprits for the dollar’s decline is the recent JOLTS report, which revealed that job openings in the U.S. fell to their lowest level in nearly two years. The report showed that labor demand dropped from 632,000 to 9.9 million on the last day of February, putting pressure on the dollar.

In addition, U.S. factory orders have declined for the second consecutive month, dropping by 0.7% in February after a 2.1% decrease in January. That’s not a good sign for the U.S. economy, and it’s not doing the dollar any favors either.

To add insult to injury, the rate futures market is now pricing in a roughly even chance of a 25 basis-point rate hike in May, with the rest of the odds tilted towards a pause from the Fed. That’s a big shift from Monday, when the probability of a hike was over 65%. The rate market is also factoring in Fed cuts by the end of December, which is not exactly a vote of confidence in the dollar.

Conclusion

So what does this all mean for the U.S. dollar? Well, it’s not looking great at the moment.

The weak economic data and speculation about the Fed’s tightening cycle are causing the greenback to lose ground against other currencies like the pound sterling and the euro. And with other central banks expected to continue raising interest rates to combat inflation, the dollar may remain under pressure for the foreseeable future.