The dollar-euro exchange rate usually moves in lockstep with rate differentials (interest-rate swaps as well as government bonds), but Thursday morning it fell out of bed. The chart above shows the euro exchange rate at 1-minute intervals against the value predicted by interest rates.

Before the dollar’s small but significant drop on Thursday morning, Morgan Stanley currency strategists observed in a May 9 note to clients that something wasn’t right:

“When the US imposed additional duties on imports from China last year (effective on September 24), the initial market reaction worked via FX, seeing the USD rallying across the board … Now as US-China trade tensions seem to be escalating again, it is the bond and the equity market doing the adjustment work while the safe haven bid for the USD has remained muted.”

Read more: The dollar that didn’t bark

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