What’s happening: The US dollar declined on Wednesday, extending its losing streak from the beginning of this week.

What happened: Having been heavily shorted this week, the greenback suffered the steepest three-day decline since 2022 on Wednesday.

Apart from trade war jitters, investor concerns grew after the US reported negative economic data

The US dollar suffers its sharpest three-day decline since 2022

Why it matters: The US dollar has been under pressure on growing fears of a trade war after President Donald Trump slapped tariffs on Canada, Mexico and China. Canadian Prime Minister Justin Trudeau responded with retaliatory tariffs worth $107 billion on US goods. Mexico has adopted a more measured stance, delaying the announcement of retaliatory tariffs till the end of the week.

China was prompt to impose 10%-15% tariffs on US agricultural products. Also, China’s embassy posted on X on Wednesday: “If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end.”

Will the US dollar continue to fall?

Meanwhile, the US reported economic data that fuelled concerns around a slowdown in the economy. US private businesses added 77,000 workers to their payrolls in February, much below the 186,000 job adds in January. The figure not only fell significantly short of market expectations of 140,000, but also represented the smallest increase in payrolls in seven months.

The S&P Global services PMI fell to 51 in February, from 52.9 in the previous month, while the composite PMI declined to 51.6 last month, from January’s reading of 52.7.

New factory orders growing by 1.7% in January after two consecutive months of declines gave markets something to cheer about. The ISM services PMI also supported market sentiment, rising to 53.5 in February, from 52.8 in January, and beating market forecasts of 52.6.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, declined by 1.33% to 104.34 on Wednesday.

US dollar falls sharply

What to watch: Investors will monitor comments by the Trump administration and how the countries under attack respond. Markets will also watch the release of balance of trade and initial jobless claims by the US today (17:30 UAE Time).

The US trade deficit widened to $98.4 billion in December, from $78.9 billion in the previous month. The consensus calls for a further worsening of the trade deficit to $127.4 billion in January. Initial jobless claims in the US, which rose by 22,000 to 242,000 in the third week of February, is expected to rise further to 235,000.