Dollar rallies on short covering after upbeat U.S. servcies PMI outweighs weak ADP payrolls data

The greenback went through a roller-coaster session on Wednesday. Although dollar fell at New York open after U.S. ADP private payrolls grew at the smallest pace in over 9 years, release of upbeat U.S. ISM non-manufacturing PMI data triggered active short covering, price erased its losses and ended higher due to rising U.S. Treasury yields together with gains in U.S. equities.  
  
Reuters reported Wednesday's ADP National Employment Report showed U.S. private employers added 27,000 jobs in May, well below forecasts and the smallest monthly gain in more than nine years. The data knocked the dollar, adding to a multi-day slide on rising expectations of an interest-rate cut.    
On the data front, Reuters reported U.S. services sector activity picked up in May and industries hired more workers, which could ease concerns that the economy was slowing sharply following a recent spate of weak reports.    
The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing activity index increased 1.4 points to a reading of 56.9 last month. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity.  
  
Versus the Japanese yen, the dollar initially retreated from 108.27 in Australia to 107.98 at European open before rising recovering to 108.37. However, the release of downbeat U.S. ADP data knocked price to a 6-month low of 107.82 before rallying to session highs of 108.48 on broad-based usd's gain.  
  
The single currency went through a volatile session. Although price traded with a firm bias in Asia and gained to 1.1288 in Europe cross-buying in euro, the pair retreated to 1.1253 on Italy's public debt concern before jumping briefly to a 1-month high at 1.1306 at New York open due to releae of much weaker-than-expected U.S. ADP data but only to tumble to as low as 1.1220 near New York close on broad-based usd's rally.    
Reuters reported the European Commission has concluded on Wednesday that Italy is in breach of EU fiscal rules because of its growing debt, a situation that justifies the launch of a disciplinary procedure.   If the European Union states back this assessment in the next two weeks, the EU executive could subsequently recommend to start the procedure, a move expected before a meeting of EU finance ministers in early July.   
  
The British pound also went through a hectic session. Although cable gained in tandem with euro to 1.2724 at European open, price fell to 1.2692 on cross-selling in sterling. However, renewed buying emerged and pushed the pair to an eight-day high at 1.2744 at New York open after disappointing U.S. ADP data before retreating in tandem with euro to 1.2681.  
Reuters reported British economic growth almost halted last month as a modest expansion in the services sector barely offset weakness among manufacturers and construction firms caused by the Brexit crisis and weaker global growth, a business survey showed.     
The IHS Markit/CIPS services Purchasing Managers' Index (PMI) edged up to 51.0 from 50.4 in April, its strongest reading in three months and slightly above economists' average forecast in a Reuters poll.  
  
In other news, Reuters reported current and threatened U.S.-China tariffs could slash global economic output by 0.5% in 2020, the International Monetary Fund warned on Wednesday as world finance leaders prepare to meet in Japan this weekend.     
IMF Managing Director Christine Lagarde said in a blog and briefing note for G20 finance ministers and central bank governors that taxing all trade between the two countries, as President Donald Trump has threatened, would cause some $455 billion in gross domestic product to evaporate -- a loss larger than G20 member South Africa's economy.   
  
Data to be released on Thursday :  
  
Australia trade balance, imports, exports, Germany industrial orders, EU employment, GDP, ECB interest rate decision, U.S. trade balance, jobless claims, labor costs, productivity, Canada trade balance, exports, imports and Ivey PMI.