NEW YORK (Reuters) -The dollar fell across the board on Wednesday after weaker-than-expected U.S. private payrolls data highlighted continued easing in the labor market and data showed U.S. services sector contracted for the first time in about a year in May.

U.S. private payrolls rose by only 37,000 jobs in May, far less than expected, after a downwardly revised 60,000 rise in April, the ADP National Employment Report showed on Wednesday.

Economists polled by Reuters had forecast private employment increasing 110,000 following a previously reported gain of 62,000 in April.

The data prompted U.S. President Donald Trump to reiterate his calls for Federal Reserve Chair Jerome Powell to lower interest rates.

“It’s a major gap between expectation and actual,” Juan Perez, director of trading at Monex USA in Washington.

“This idea that labor has not been hurt and that the post-pandemic recovery was good enough that people are enjoying good opportunities … that narrative is changing and that’s absolutely very negative for the U.S. dollar,” he said.

Separately, data showed the U.S. services sector contracted for the first time in nearly a year in May while businesses paid higher prices for inputs, a reminder that the economy remained in danger of a period of very slow growth and high inflation.

The dollar was 0.6% lower against the Japanese yen at 143.165 yen. The euro rose 0.5% to $1.1424, ahead of the European Central Bank’s decision on interest rates expected on Thursday.

“We think that the Fed will lean toward a more ‘dovish’ message on June 17 than it did on May 7, and the prospect for a rate cut in 2025 has strengthened a bit,” Thierry Wizman, Global FX & Rates Strategist at Macquarie, said in a note, following the ADP data.

Investors are now looking to Friday’s highly anticipated monthly payrolls figures to gauge the state of the labor market.

Focus Also Remains on Trade Negotiations

The Trump administration has given a deadline of Wednesday for countries to submit their best offers on trade, the same day duties on imported steel and aluminium doubled.

Trump is also tipped by the White House to have a call this week with Chinese President Xi Jinping, after the two sides accused each other of violating the terms of an agreement last month to roll back some tariffs.

Trump on Wednesday posted on his social media platform that Xi was “tough” and “hard to make a deal with.”

The Swiss franc rose 0.5% to 0.820 francs to the dollar, while the dollar index, which measures the currency against six others, was flat 0.3% lower on the day at 98.847, not far from its late April low of 97.923.

The Hong Kong dollar was at 7.8469 per U.S. dollar, the closest it has been to 7.85 – the weak end of its trading band against the U.S. dollar – since August 2023, according to LSEG data.

Sterling was 0.3% higher at $1.35585. The UK and its metal exports are exempt from the increased U.S. duties, given Britain has a trade deal in place.

In the meantime, traders were also keyed in on developments in Japanese markets after sources told Reuters the Bank of Japan is considering slowing down the pace of tapering in its bond purchases from next fiscal year onward.

Elsewhere, the Canadian dollar was about 0.3% higher versus its U.S. peer after the Bank of Canada on Wednesday held its key benchmark rate at 2.75%, citing the need to probe the effects of U.S. trade policy.

Bitcoin, the world’s largest cryptocurrency by market capitalization, was 1% lower on the day at $104,839.

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(Reporting by Saqib Iqbal Ahmed; Additional reporting by Kevin Buckland and Johann M Cherian; Editing by Gareth Jones and Nick Zieminski)