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"If short rate expectations are going to drive currency trends, we'll go on seeing the ECB's hawkish stance dominate and there's more upside to EUR/USD...to come," said Kit Juckes, chief FX strategist at Societe Generale.

Darren Wolf, global head of investments, alternative investment strategies at Aberdeen Standard Investments, who manages $13 billion in hedge fund assets, said that hedge fund managers “had a ‘don’t fight the Fed’ mentality, and didn’t have short rate bets on in much size,” meaning the yield spike didn’t benefit them.

Bringing reserves to $1.7 trillion would provide a cushion of about $200 billion to absorb shocks during periods of tight liquidity, said Joseph Abate, a short rate strategist for Barclays.

Although cutting the short rate to 1 percent as Trump demands would reverse the inversion, we’d be treating a symptom of possible economic disease rather than treating the disease.

“That leaves lowering the short rate as the primary tool available to fight the next recession.”