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U.S. Dollar Lower On Worries Over Economic Slowdown

The U.S. dollar was lower against its major opponents in the European session on Wednesday, amid continued worries over U.S. treasury bond market as flattened or "inverted" yield curve pointed to an economic slowdown.

Investors fretted over so-called "inverted yield curve," or short-term debt yields trading above longer-term debt yields, which signaled about an upcoming economic slowdown.

The yield on the five-year Treasury dropped below the two-year and three-year Treasury yields on Monday. The inversion in U.S. Treasury yields hasn't took place since 2007, before the start of the Great Recession.

The U.S. bond markets are closed on Wednesday in observance of a national day of mourning for former President George H.W. Bush.

There is skepticism and confusion about the truce between the U.S. and China on trade after China promised action but gave no details on the tentative truce.

Investor confidence is also waning due to Brexit-related uncertainty after Theresa May's government suffered three successive defeats in the British Parliament on Tuesday.

The currency was trading higher against its major counterparts in the Asian session.

The greenback dropped to 1.2798 against the pound, down from a high of 1.2672 hit at 1:00 am ET. The next possible support for the greenback is seen around the 1.30 level.

Survey results from IHS Markit showed that UK services sector growth slowed to its weakest level in nearly two-and-a-half years in November.

The CIPS UK Services purchasing managers' index, or PMI, fell to 50.4 from 52.2 in October, marking the lowest level since July 2016. Economists had forecast a score of 52.5.

The U.S. currency pared gains to 112.93 against the yen, from a high of 113.12 seen at 2:15 am ET. The greenback is seen finding support around the 111.00 mark.

The latest survey from Nikkei showed that Japan services sector continued to expand in November, albeit at a fractionally slower pace, with a PMI score of 52.3.

That's down from 52.4 in October, although it remains well above the boom-or-bust line of 50 that separates expansion from contraction.

Following a 5-day high of 1.1317 touched at 1:00 am ET, the greenback retreated to 1.1358 against the euro. On the downside, 1.15 is seen as the next likely support level for the greenback.

Preliminary data from Eurostat showed that Eurozone retail sales grew in October after decreasing in the previous month.

Retail sales grew 0.3 percent from September, when they fell 0.5 percent, after the stagnation reported earlier was revised. Economists had forecast a 0.2 percent increase for October.

The greenback eased to 0.9972 against the franc, from an early weekly high of 1.0005, and held steady thereafter. If the greenback falls further, 0.97 is possibly seen as its next support level.

Having advanced to a 5-day high of 1.3295 against the loonie at 4:45 am ET, the greenback reversed direction with the pair trading at 1.3274. The greenback is poised to find support around the 1.30 mark.

The greenback pulled back slightly to 0.7299 against the aussie, from an early weekly high of 0.7282. Next key support for the greenback is seen around the 0.74 region.

The greenback held steady against the kiwi, after having retreated from a 2-day high of 0.6909 seen at 11:00 pm ET. The pair was valued at 0.6929 at yesterday's close.

Looking ahead, the Bank of Canada announces its interest rate decision at 10:00 am ET. Economists forecast the benchmark rate to remain unchanged at 1.75 percent.

The Federal Reserve's Beige book report is due at 2:00 pm ET.

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