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Maybe a stupid question, but did you disable two finger swipe in Mouse preferences?
 
Have you restarted you Mac? Also, turn your Magic Mouse off the back on. That should fix it.
 
I checked in system preferences and the two finger gestures was still enabled. I did however restart my computer and it seems fine now.

It's just odd that it just stopped working as I turn my iMac off every night and the computer was just turned on a few hours ago. My wife noticed it was not working on her user account also.
 
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