Bas van Geffen, Quantitative Analyst at Rabobank, notes that the major move was in EUR/USD yesterday, though, after the dollar quickly lost value when US data missed again, the pair briefly touched a high of 1.1146. Key Quotes “A roughly in-line ADP employment report (205k, vs. 195k expected) couldn’t reassure markets long enough, as an hour and a half later the ISM non-manufacturing composite came in well below consensus, printing 53.5 versus an expected 55.1. This is the lowest headline in two years, and the developments in the sub-components aren’t much brighter. Firstly, the employment index fell to 52.1 from 56.3 in December, while business activity declined to 53.9 from 59.5. Moreover, prices paid fell to 46.4, contracting from 51.1. If broader price developments remain weak, this could raise further doubts about the future path for US rates. While we currently do not see the Fed make a U-turn on rates, downside risks to the number of hikes in 2016 are clearly increasing. These downside risks were also reflected in an interview with New York Fed President Dudley. Speaking to news agency MNI, Mr. Dudley warned that US financial conditions have tightened since the central bank decided to increase its policy rate in December, adding that ongoing tightening of financial conditions could weigh on the Fed. In particular, he warned that the stronger dollar could have “significant consequences” for the economy, and that ongoing turmoil in financial markets may affect the Fed’s outlook for US growth. Is this a first hint of yet another central bank potentially caving to the pressure of the global currency wars? Despite US crude oil inventories also hitting new highs yesterday (+7.8m weekly rise vs. 3.8m expected) and production seeing no signs of any slowing, WTI rallied an astonishing 8% to USD 32.75/bbl at the time of writing. Investors benefitted from the weaker dollar, which lowers the foreign exchange price of oil, while comments by Russia’s foreign minister Lavrov revived (vain?) hopes of a deal between OPEC and non-OPEC members that should cut global production and lift prices.” For more information, read our latest forex news.