US ADP National Employment Report: Private sector adds 145,000 jobs in March

Another report on Wednesday also indicated continued economic weakness, this time in the services sector. That industry slowed more than expected in March as demand cooled, while a measure of prices paid by services businesses fell to the lowest in nearly three years.

The ISM's non-manufacturing index fell to 51.2 last month from 55.1 in February, while the prices paid component declined to 59.5 from 65.6 in February with the services sector's employment indicator sliding as well to 45.8 from 47.6 in February.

"People are coming to the realization that the strength (in economic data) we saw in January was just a blip. It wasn't a trend," said Thierry Wizman, global FX and rates strategist at Macquarie in New York.

"Yes inflation is still high, but there is plenty of evidence in the pipeline showing that disinflation is the underlying trend...and part of the basis as to why the Fed is sounding ambiguous these days."

Cleveland Federal Reserve Bank President Loretta Mester, a known hawk, said in an interview with Bloomberg TV on Wednesday that it was too early to know if the U.S. central bank would need to raise its benchmark interest rate at its next policy meeting in early May.

US rate futures markets are now pricing in a 62% chance of the Fed leaving rates unchanged at its next meeting, up from a 43% chance a day earlier. On Tuesday, markets had still factored in a more than 60% chance of a small rate hike of 25 basis points (bps) next month.