Flash: EUR/USD fortunes hang on QE – BMO Capital Markets

FXstreet.com (New York) – From a flows and funding basis, the most important difference between the EUR and the USD is that the latter is a “QE currency” whilst the former is not, notes Greg Anderson at BMO Capital Markets.

Key quotes

“This means that the USD’s transformation phase to being positively correlated with risk will be gradual. Indeed, the Fed’s July/August dovishness has already held things up. If the Fed extends the deadline for ending asset purchases under QE3, the correlation between the DXY and equities should become more negative.”

“If the Fed tapers, then jawbones, then tapers some more and then …read more