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    European Session – Dollar under pressure on Fed’s Dudley and weak ISM non-manufacturing PMI

    Sterling was one of the best performing major currencies against the dollar today, rallying to a three-week high on upbeat UK data.

    The UK services PMI index surprised to the upside in January to come in at 55.6 versus 55.5 in December. Most forecasts were for a dip to a reading of 55.4. The upbeat data helped lift the pound above the key psychological mark of $1.45. It was last at $1.4594. The main risk ahead for the British currency will be Thursday’s Bank of England meeting along with the release of the Quarterly Inflation Report.

    The euro was strong today versus the dollar and broke the key $1.10 level. It has retraced all of Friday’s big drop to reach a seven-week high of 1.1072. The single currency has been buoyed due to its safe haven status particularly against the greenback as it continues to ignore fundamental data releases. Meanwhile, the broadly weaker dollar also helped it.

    Data today showed the Eurozone services PMI fell to 53.6 in January from 54.3 in December. The composite PMI index which combines services and manufacturing, dropped to 53.6 from 54.2 in December.

    Data out of the US today included the ADP jobs report and the ISM non-manufacturing PMI. The better-than-expected reading in the ADP employment did not help the dollar, which was weak across the board today due to dovish comments by New York Fed President Bill Dudley. The Fed speaker warned about the strong dollar and tightening market conditions which could affect the US central bank’s rate hiking path.

    According to the private payrolls report, US employers added 257,000 jobs in December, above a forecast of a 198,000 gain. Meanwhile, disappointing ISM non-manufacturing figures pressured the greenback even more, causing it to nose-dive versus the yen to 117.50. The index fell to 53.5 in January from December’s 55.3.

    The dollar also fell against the Canadian currency to reach a low of $1.3835, a one-month low. The loonie was also helped by higher oil prices. US crude moved back above $30 a barrel today, while Brent crude -the international benchmark – rose above $33 a barrel.

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