EUR/USD dropped from 109.80 to 109.20 within minutes of the 09:45 release of the Markit US Services PMI, which came in at 58.6 vs. a consensus of 57. U.S. manufacturing data have uniformly disappointed for the past month, as lower oil prices and a strong dollar depressed exports and CapEx. The last cylinder firing in the U.S. economy is the services sector, that is, non-tradeables that are not affected by dollar strength. Buoyant 10-year Treasury yields also supported the dollar. EUR/USD has repeatedly tested the 1.10 threshold during the past week without breaking through.

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