The U.S. dollar drifted lower against its key counterparts in the European session on Thursday, as the nation's private sector employment grew less than expected in August, while concerns that the Trump administration would impose new tariffs on Chinese goods after the end of a public comment period also dampened sentiment.

Data from the payroll processor ADP showed that U.S. private sector employment climbed by 163,000 jobs in August after jumping by a revised 217,000 jobs in July.

Economists had expected an increase of about 190,000 jobs compared to the spike of 219,000 jobs originally reported for the previous month.

U.S. President Donald Trump is set to impose tariffs on another $200 billion of Chinese imports as soon as a public comment period ends later in the day.

If the U.S. goes ahead with the tariffs, China is likely to retaliate in a tit-for-tat trade war.

Meanwhile, Canada's Foreign Minister Chrystia Freeland said that the U.S. and Canada are making "good progress" on the revision of the North American trade pact but talks will continue to resolve remaining issues.

The currency dropped against its major counterparts in the Asian session.

The greenback weakened to 1.2960 against the pound from yesterday's closing value of 1.2904. If the greenback falls further, it may find support around the 1.32 level.

The greenback fell back to 1.1655 against the euro, just few pips short of a 6-day low of 1.1659 seen at 8:15 pm ET. The greenback is likely to challenge support around the 1.18 level.

Data from Destatis showed that Germany's factory orders dropped unexpectedly on foreign demand in July.

New orders in manufacturing fell 0.9 percent in July from June, confounding expectations for an increase of 1.8 percent. Nonetheless, this was slower than the 3.9 percent decline seen in June.

The greenback slipped to a 2-day low of 111.12 against the yen and a 6-day low of 0.9677 against the franc, off its early highs of 111.53 and 0.9719, respectively. On the downside, 110.00 and 0.95 are possibly seen as the next support levels for the greenback against the yen and the franc, respectively.

The greenback pared gains to 0.7208 against the aussie, from a high of 0.7166 hit at 1:30 am ET. The greenback is poised to find support around the 0.74 level.

The greenback retreated to 0.6606 against the kiwi, following a high of 0.6572 seen at 2:30 am ET. This may be compared to a 3-day low of 0.6616 set in the Asian session. Next key support for the greenback may be seen around the 0.68 region.

On the flip side, the greenback was moderately higher against the loonie with the pair trading at 1.3188. This follows a low of 1.3164 seen at 8:15 pm ET. The greenback is seen finding resistance around the 1.35 region.

The U.S. factory orders for July and ISM non-manufacturing composite index for August are set for release shortly.

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