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Forex - Dollar drops as data surprises, stocks soar

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Shutterstock photo - The dollar weakened against most major currencies on Tuesday after U.S. service-sector data defied negative expectations and fueled a rally in equities markets, which enticed investors out of the safety of the greenback.

Solid data out of Europe fueled the risk-on trading session as well, with U.S. stocks breaking records in intraday trading.

In U.S. trading on Tuesday, EUR/USD was up 0.13% at 1.3042.

In the U.S. earlier, the Institute for Supply Management said its February non-manufacturing index rose to 56.0 from 55.2 in January, beating analysts' calls for the index to fall to 55.0 last month.

The news sparked a rally in U.S. stock markets, which saw record highs earlier.

Elsewhere in Europe, Germany's services PMI rose to 54.7 in February, beating market calls for a 54.1 reading, according to Markit Economics.

A eurozone services PMI hit 47.9 compared with consensus forecasts for a 47.3 reading.

Elsewhere, official data released earlier revealed that eurozone retail sales rose by 1.2% in January, well above expectations for a 0.2% gain.

U.S. and European equities proved to be the asset class of choice during Tuesday's risk-on trading session, which sent the dollar sliding albeit in choppy trading at times.

The greenback, meanwhile, was slightly lower against the pound, with GBP/USD trading up 0.02% at 1.5115.

The dollar slid against the yen, with USD/JPY trading down 0.17% at 93.31, and was up against the Swiss franc, with USD/CHF trading up 0.09% at 0.9416.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.04% at 1.0276, AUD/USD up 0.50% at 1.0246 and NZD/USD trading up 0.51% at 0.8318.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.14% at 82.14.

On Wednesday, the U.S. is to publish data on ADP nonfarm payrolls, a precursor to official data on nonfarm payrolls to be released on Friday. The U.S. is also to release official data on factory orders and crude oil stockpiles.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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