Markets are trading in relatively subdued fashion, leaving the USD soft overall but little changed on the session and holding near the past week's low, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD soft but little changed

"High beta FX is leading limited gains on the USD in the major currency space. Stocks are modestly higher in Europe after a mixed session in Asia. US equity futures are little changed. Bonds are mostly firmer but Treasurys are underperforming a little. Markets are short on incentives to move today—an ECB rate cut is largely discounted and US data reports this morning take a bit of a back seat ahead of Friday's jobs report. Yesterday's round of US data provided some further evidence that tariff uncertainty was starting to bite."

" ISM Service sector activity contracted in May, in contrast to expectations for a pick up in growth. Prices rose and new orders dropped. The ADP data delivered another downbeat report, with private sector hiring of just 37k in May (against forecasts of a 114k gain). ADP tracking with NFP data has been weak but the broader trend in the two data series is similar. Soft ADP data do suggest some risk of the headline NFP report weakening in the near future at least. Market expectation appear to be adjusting in anticipation of a soft NFP report Friday but a weak number will undercut the USD further."

"Beyond the data, news of tariff negotiation progress remains scant and signs of friction in the Republican part around President Trump's tax cut bill adds to the unhelpful uncertainty around the outlook. The overall technical look of the DXY remains bearish, we think. The downtrend in place since the start of the year remains intact and entrenched. Technical momentum signals remain aligned bearishly (for the DXY) across a range of time frames. Typically, that means little scope for counter trend corrections and an ongoing bias towards weakness. We think the DXY could lose as much as another 5-10% in the next few months."

Source: FXStreet