Archived IMT (2010.11.18)

FX MARKETS may temporarily revert to the textbook relationship, whereby decent US data is a positive for the US currency, based on yield differentials and revised expectations on the completion of the $600 bln QE2. THIS WEEK's REMARKS FROM St Louis Feds Bullard raising the possibility that the Fed may not purchase the full $600 bln announced under QE2 could mark a new rhetorical method for the hawks at the FOMC. This means that markets will now be faced with a binary assessment to the Fed i.e QE2 will either be fully implemented or not. Creating a binary or 2-pronged option choice regarding Fed expectations is likely to intensify the momentum of market moves in bonds, FX and even equity indices. Accordingly, positive US data starting to favour the USD, especially as the risks of Irish debt. STRONG PHILLY FED SURVEY and the lowest 4-week MA of US jobless clains since Sepp 2008 has boosted USD against JPY and CHF while dragging EUR by nearly 100 pts from 13660s.