The US dollar strengthened on Wednesday, after touching its lowest level in two months on Tuesday, as employment from the private sector in the United States improved.
A report released by ADP Research Institute earlier today showed that private sector employment increased by 246,000 in January from December on a seasonally adjusted basis. Midsized businesses accounted for almost half of the increase, adding 102,000 employees. Meanwhile, large private businesses filled 83,000 jobs and small firms hired 62,000 workers.
The data exceeded analystsâ expectations and signaled that the official nonfarm payroll data, which will be released on Friday, might surpass estimates. The majority of the private sector employment increase was at the services sector, which had 201,000 new jobs.
The dollar rose as traders believed that the increased hiring is further tightening an already tight labor market, which will put more pressure on wage growth and increase inflation. The Federal Reserve is closely monitoring the inflation rate to decide its future monetary policy and the timing of its next interest rate hike. Higher interest rates support the greenback.
The US central bank will finish a policy meeting that will have lasted for two days at 17:00 GMT today. Interest rates are widely expected to be left unchanged, according to the CME Group FedWatch Tool. However, currency traders will look for hints on the next interest rate increase in the Federal Reserveâs policy statement.
EUR/USD traded at 1.0757 as of 16:50 GMT on Wednesday, from 1.0739 at 15:05, the pairâs highest level since midday trading yesterday. EUR/USD opened trading today at 1.0797.
The Dollar Index, which measures the strength of the US currency against a basket of its major peers, was at 99.86 as of 16:43 GMT, from 99.51 on Tuesday.
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