Forex - Greenback gains strength on weak euro zone numbers

Investing.com - The U.S. dollar traded higher against its major counterparts in holiday-thinned trade Wednesday, as weak euro zone and U.K. data soured market sentiment; however gains were limited by hopes for more easing measures from central banks.

During U.S. afternoon trade, the dollar was higher against the euro, with EUR/USD falling 0.59% to hit 1.2534.

Traders were awaiting the outcome of the European Central Bank’s policy meeting on Thursday, amid growing expectations for a rate cut to help bolster growth in the euro zone.

Earlier in the day, the final reading of the euro zone services purchasing managers’ index came in at 47.1 in June, slightly above the preliminary estimate of 46.8, but still below the 50 level which separates contraction from growth.

The greenback was also higher against the pound, with GBP/USDdown 0.52% to hit 1.5604.

In the U.K., data indicated service sector activity expanded at the slowest rate in eight months in June, fuelling expectations for a fresh round of quantitative easing from the Bank of England following its rate setting meeting on Thursday.

The Markit/CIPS Services PMI fell to 51.3 in June from a reading of 53.3 in May, missing expectations for a decline to 53.0.

Elsewhere, the greenback inched higher against the yen, withUSD/JPY easing up 0.04% to 79.82, and extended gains against the Swiss franc, with USD/CHF adding 0.69% to hit 0.9590.

The greenback edged higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD easing up 0.11% to 1.0131,AUD/USD dipping 0.02% to 1.0277 and NZD/USD inching down 0.08% to hit 0.8030.

The Australian dollar had found support earlier after official data showed that domestic retail sales rose 0.5% in May, outstripping expectations for a 0.3% increase, after a 0.1% gain in April.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, climbed 0.50%, to 82.29.

Trade volumes were expected to remain light on Wednesday, with markets in the U.S. closed for the Independence Day holiday.