QE2 was certainly very negative for the USD, but should QE3 be the same, "I am not convinced," says Greg Gibbs, currency strategist at RBS. He adds that tail risk in Europe has been reduced significantly and capital flight has reversed. But the fact remains that more risk has been shifted to the core euro zone, and the path to economic recovery and fiscal sustainability has not been paved. Gibbs says it is worrying that with the fire no longer at the feet of European policy makers, we see over the weekend road-blocks to the plans to centralise euro-zone bank supervision at the ECB, significant public protests over austerity measures. "My fundamental assessment is that the EUR will eventually return to a downtrend," Gibbs says. The EUR/USD is now at 1.3138.
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