U.S. Dollar Falls On Weak U.S. Economic Data

(RTTNews) - The U.S. dollar weakened against other major currencies in the European session on Tuesday, as traders' confidence was tempered by weak U.S. economic data.

Data from the Institute for Supply Management on Monday showed its reading on U.S. manufacturing edged slightly lower in February, although the index still indicated growth in the sector for the second straight month.

The ISM said its manufacturing PMI slipped to 50.3 in February after rising to 50.9 in January, but a reading above 50 still indicates growth. Economists had expected the index to dip to 50.5.

The production index also fell to 50.7 in February from 52.5 in January, while the employment index slid to 47.6 in February from 50.3 in January.

Data from the Commerce Department showed on Monday that the construction spending in the U.S. unexpectedly edged modestly lower in the month of January.

The Commerce Department said construction spending slipped by 0.2 percent to an annual rate of $2.193 trillion in January after climbing by 0.5 percent to a revised rate of $2.196 trillion in December. Economists had expected construction spending to come in unchanged.

The unexpected dip by construction spending came as spending on private construction fell by 0.2 percent to an annual rate of $1.686 trillion.

Investors wait for the European Central Bank policy meeting on Thursday, with traders pricing in another 25-basis point cut.

Meanwhile, trade tensions weighed on markets after U.S. President Donald Trump's long-threatened tariffs against Canada, Mexico and China went into effect today.

Canada announced 25 percent tariffs on $107 billion worth of U.S. goods, with $20.7 billion in immediate effect. Mexican President Claudia Sheinbaum said her country is preparing countermeasures.

China has announced 15 percent tariffs on U.S. chicken, wheat, corn and cotton, plus 10 percent cent tariffs on soybeans, pork, beef and dairy beginning March 10.

In the European trading today, the U.S. dollar fell to a 1-week low of 148.60 against the yen and a 6-day low of 1.0528 against the euro, from early highs of 149.57 and 1.0471, respectively. If the greenback extends its downtrend, it is likely to find support around 144.00 against the yen and 1.06 against the euro.

Against the pound and the Swiss franc, the greenback slipped to near 3-month lows of 1.2741 and 0.8906 from early highs of 1.2679 and 0.8972, respectively. The greenback may test support near 1.28 against the pound and 0.87 against the franc.

The greenback edged down to 1.4410 against the Canadian dollar, from an early high of 1.4521. On the downside, 1.41 is seen as the next support level for the greenback.

Looking ahead, U.S. Redbook report and U.S. RCM/TIPP economic optimism index for March are slated for release in the New York session.