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Weekly FX roundup: US Dollar continues recovery as QE2 fears lack details

18 October 2010

The Greenback has continued to gain since Friday's positive closing, with risk correlated trades quickly falling out of favour. The market has gotten ahead of itself in pricing-in massive QE2 for the US. Clearly the combo of the FOMC minutes, Bernanke's comments and underlying inflation "trending downwards" all point to further easing but the lack of details - especially critical detail of time frame & magnitude, has the market pulling back slightly this trading week. In addition, the month long USD selling spree created a market well short of USD (going by the IMM speculative data) and ripe for a short squeeze.

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