The dollar fell against the euro and yen after a report showed the U.S. trade deficit widened more than expected in December. The Commerce Department said the trade gap increased to $40.6 billion, up from $36.3 billion the previous month.

Imports rose 3.2% to $222.7 billion, while exports fell 0.8% to $182.1 billion. The widening deficit suggests that U.S. economic growth may be weaker than previously anticipated.

“The trade deficit was a bit of a surprise, and it’s weighing on the dollar,” said John Smith, a currency strategist at ABC Bank. “The market is now pricing in a slower pace of recovery in the U.S.”

The euro rose to $1.36 against the dollar, while the dollar fell to 82.50 yen. The dollar index, which measures the dollar’s value against a basket of six major currencies, fell 0.5% to 78.50.

Analysts said that the dollar could face further pressure if upcoming economic data, such as the jobs report, disappoints expectations. Investors will be closely monitoring these indicators to assess the outlook for the U.S. economy and the future direction of the dollar.