The Dollar turned lower on Wednesday, reversing sharp gains against the Euro and Yen seen earlier this week, as steep job losses in the private sector renewing fears of a deeper US recession. The ADP National employment report showed a decline of 693k in US private sector employment for December, which could well prompt some analysts to lower their already weak forecasts for this Friday Non-farm payrolls number. Market expects US non-farm jobs to drop by 500k in December. Analyst said the ADP report suggested that the government's more comprehensive non-farm payrolls data could show a loss of about 670k jobs.

The Dollar reversed from nearly one-month highs against Euro and 5-week peaks versus Yen, with investors taking profits, including Central Bank buying Euro at lower levels for reserves management purposes as well as interest from funds.

Yesterday, EurUsd traded up 0.81% at 1.3615, down from a session peak of 1.3747 but well off the one-month low 1.3313 hit on Tuesday. UsdJpy fell 0.7% to 92.74 after hitting 5-week highs 94.64. UsdChf fell 1.14% to 1.1037 after hitting 1.0869 low. GbpUsd rose 1.08% to 1.5072 having hit 1.5280 intraday high.

Yesterday data showed a fast weakening euro zone economy and easing inflation there, which raised the expectation for the European Central Bank to cut rates again next week. Euro-zone producer prices fell sharply in November. That was following previous day data showing a smaller-than-expected rise in consumer prices, raising expectations that the ECB will be ready to ease monetary policy, not only at its meeting next week, but next month as well.

Bank of England is expected to cut rate by a minimum of 50bp. However many analysts are betting on a 100bp to 150bp cut from current 2%.