US Dollar Index (DXY) remains depressed below 99.00 as recession fears return

• Weak US data and the ongoing tariff uncertainty are weighing on the USD.

• US services activity contracted in May for the first time in almost a year.

• The lack of advances in trade negotiations is adding pressure on the Dollar.

The US Dollar Index (DXY) is trading practically flat on Thursday, consolidating losses after a bearish reversal on Wednesday, as downbeat Services and employment data, coupled with the ongoing tariffs uncertainty, revived fears of an upcoming recession.

The US Institute of Supply Management’s Services PMI reading revealed that business activity in the sector contracted for the first time in nearly a year. The index dipped to 49.9 in May from 51.6 in April against an improvement to the 52.0 level forecasted by the market.

Weak US data and trade concerns keep the USD on the defensive

These figures follow another negative surprise in the Manufacturing sector, and a sharper-than-expected decline in Factory orders, all in all figures that hints to a weak US economic growth in the second quarter.

Somewhat earlier, the US ADP Employment report posted a poor 37K increase on May’s private payrolls against expectations of a 115K increase. These figures cast doubt on Friday’s Nonfarm Payrolls report and have heightened fears of a significant slowdown in employment creation.

Beyond that, US President Trump complained that reaching a deal with Chinese President Xi is “extremely hard”, which brought the lack of progress on the trade negotiations back to the forefront, dampening sentiment further and adding pressure to a battered US Dollar.