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Euro Gains to a Three-Month High as Fed Outlook Overshadows ECB

  • JPMorgan exits tactical short euro position to turn neutral
  • Nordea has a year-end prediction of $1.17 if data is positive
A set of 20 euro notes are arranged for a photograph in London, U.K., on Wednesday, Jan. 18, 2012. The euro strengthened and commodities rallied as an official at a Group of 20 nation said the International Monetary Fund is proposing a $1 trillion expansion of its lending resources. U.S. index futures rose before Goldman Sachs Group Inc. reports earnings.
Photographer: Simon Dawson
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The euro rose to a three-month high on conviction that the Federal Reserve’s ability to cut borrowing costs more quickly than the European Central Bank will hurt the dollar.

The common currency advanced to the strongest level since March as the extra yield investors get from holding 10-year U.S. Treasuries rather than German bunds narrowed. Money markets are betting that the Fed will reduce its benchmark rate next month, sooner than the ECB that is expected to cut in September.