Risk appetite is storming back into markets as investors wait for more details about a U.S. government bad bank proposal.
The U.S. dollar is down against all G10 currencies as the market prepares for comments from U.S. Treasury Secretary Timothy Geithner. He will be speaking at 8:45 a.m. EDT to give more details about a proposal to help remove some of the toxic assets from the major U.S. banks.
Over the weekend, the Wall Street Journal published a story releasing some of the details Geithner is expected to unveil, which include creating subsidies to encourage private sector investments to offset risk. The program will initially be worth $500 billion but can be expanded to $1 trillion, Geithner said.
During the European session, EUR/USD broke through 1.37 hitting a session high of 1.3736 on initial reaction to the Wall Street Journal Story. The cross is almost a cent off its session high this morning ahead of the U.S. government announcement, but still remains at the top of its recent range hovering in the mid-1.26 level.
The euro has shrugged off mixed European data. Reports released overnight included the euro zone trade deficit, which grew to €10.5 billion in January, more than the €9.0 billion deficit expected. In some positive news, euro zone construction output showed a modest rebound in January. According to Eurostat, euro zone construction output rebounded 1.3% from December to January following the previous month's 2.8% decline.
Currency strategists are expecting to see further losses in the U.S. dollar following the U.S. government announcement this morning. Strategists from Citigroup said the news will continue to support growing risk appetite and are expecting to see further gains from the euro.
They also recommend selling the U.S. dollar against the Canadian dollar, Australian dollar and Norwegian krone.
Boris Schlossberg, director of currency research at GFT, said he is expecting the U.S. dollar to continue to sell off, not because of risk aversion but due to concerns that the government is adding too much to its balance sheet.
If upon hearing the full details of the plan the market concludes that the Geithner proposal is simply another case of throwing good money after bad, the greenback could see further selling pressure as the day progresses, he said.
Euro/USD up 0.67 cents to 1.3649
USD/CAD down 1.05 cents to 1.2303
USD/Yen up 0.83 points to 96.78
GBP/USD up 1.59 cents to 1.4624
AUD/USD up 1.26 cents to 0.6998
Euro/Yen up 1.82 points to 132.09
Euro/GBP down 0.57 pence to 0.9333
GBP/CAD up 0.37 cents to 1.7991
CAD/Yen up 1.33 points to 78.67
Euro/CAD down 0.61 cents to 1.6792
The U.S. Dollar Index is down 0.42 points to 83.42
All data taken at 7:42 a.m. EDT.
By Neils Christensen, firstname.lastname@example.org, edited by Stephen Huebl, email@example.com