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Dollar Falls As Democrats Tipped To Win Georgia Runoff Elections

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The U.S. dollar drifted lower against its major trading partners in the European session on Wednesday, as Democratic candidates Raphael Warnock and Jon Ossoff are projected to win crucial runoff elections in Georgia, enabling President-elect Joe Biden to push economic policies.

With 98 percent of the votes counted, Democrat Raphael Warnock had a lead of 1 percentage point over Kelly Loeffler, while Jon Ossoff is ahead by 3,500 votes over David Perdue.

Democratic control of the Senate would enable Biden to act on his ambitious plan, which includes fresh stimulus and infrastructure spending.

Victories by Warnock and Ossoff will increase the number of Democrats in the Senate to 50, splitting the chamber and providing them, de-facto, control.

Data from payroll processor ADP showed an unexpected drop in U.S. private sector employment in December.

ADP said private sector employment fell by 123,000 jobs in December after jumping by a downwardly revised 304,000 jobs in November.

The decrease surprised economists, who had expected employment to climb by about 88,000 jobs compared to the addition of 307,000 jobs originally reported for the previous month.

The Federal Reserve releases minutes from the December meeting at 2 pm ET, with investors seeking fresh guidance on its asset purchases.

The greenback dropped in the Asian session on expectations for a Democratic victory in crucial runoff elections in Georgia.

The greenback lost 0.3 percent against the pound, touching a 2-day low of 1.3672. The pound-greenback pair had ended yesterday's trading session at 1.3626. Immediate support for the greenback is possibly seen around the 1.42 level.

Final survey data from IHS Markit showed that the UK service sector contracted more than initially estimated at the end of 2020 with the downturn overwhelmingly linked to business disruptions, restrictions on trade and temporary closures due to the Covid-19 pandemic.

The final IHS Markit/Chartered Institute of Procurement & Supply services Purchasing Managers' Index rose to 49.4 in December from 47.6 in November.

The greenback weakened to the lowest level since April 2018 versus the euro, at 1.2350. The pair was worth 1.2296 when it closed deals on Tuesday. Should the dollar falls further, it is likely to test support around the 1.26 region.

Final data from IHS Markit showed that the Eurozone private sector contracted for the second straight month in December as services activity continued to drag on economic output.

The composite output index climbed to 49.1 in December from 45.3 a month ago. The final result was lower than the earlier flash score of 49.8 and a reading below 50 suggests contraction.

The U.S. currency shed 0.3 percent against the franc to hit over a 6-year low of 0.8758. At yesterday's trading close, the pair was quoted at 0.8783. The greenback is likely to face 0.85 as downside target level.

The greenback fell to near 3-year lows against the aussie and the kiwi, touching 0.7820 and 0.7315, respectively. The greenback had closed yesterday's deals at 0.7757 versus the aussie and 0.7246 versus the kiwi. The greenback is seen finding support around 0.82 versus the aussie and 0.76 versus the kiwi.

The greenback was down at 1.2630 against the loonie, a level not seen since April 2018. The greenback was trading at 1.2667 against the loonie at yesterday's close. On the downside, 1.22 is likely seen as its next support level.

In contrast, the greenback appreciated to 103.00 against the yen, after a drop to 102.59, which was its weakest level since March 9. The pair had closed Tuesday's deals at 102.71. Further rise in the currency may find resistance around the 106.5 level.

Data from the Cabinet Office showed that Japan's consumer confidence decreased to the lowest level in four months in December.

On a seasonally adjusted basis, the consumer confidence index decreased to 31.8 in December from 33.7 in November.

U.S. factory orders for November and the Fed minutes from the December 15-16 meeting are set for release in the New York session.

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