The euro depreciated vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.2540 level and was capped around the $1.2675 level. Federal Reserve Chairman Bernanke testified today and said the Obama budget plan is an €œambitious agenda.€ He also informed Congress that policymakers must decide between financial stability and fiscal stimulus in the medium-term. U.S. equity markets opened to the high side and then faded back to the minus side during Bernanke€™s question-and-answer session. Bernanke also referred to AIG as an €œuncomfortable situation€ in which an insurance company was essentially operating as a hedge fund. Traders are already speculating that Friday€™s U.S. February non-farm payrolls number is going to be horrendous. The Fed also announced the launch of the Term Asset-Backed Securities Loan Facility (TALF), a component of the Consumer and Business Lending Initiative (CBLI). For now, this facility will lend up to US$ 200 billion to certain owners of AAA-rated asset-backed securities. U.S. Treasury Secretary testifies before the House later in the North American session. Data released in the U.S. today saw the January pending home sales index off 7.7%. Boston Federal Reserve President Rosengren reported €œI believe it would be desirable to move quickly to remove problem assets from bank balance sheets, so banks can once again focus on future prospects rather than past mistakes. Banks without troubled assets focus on avoiding further losses and further depleting capital.€ Policymakers are trying to avoid what the market is now calling €œzombie banks€ € banks that receive appreciable amounts of public liquidity injections, aren€™t nationalized, and aren€™t being restored to a healthy position. In eurozone news, many traders expect the European Central Bank will ease interest rates by 50bps on Thursday. European Union official Alumnia reported the EU will consider assembling a second fiscal stimulus for the region. The French government warned its 2009 public deficit will exceed 5% of gross domestic product. Euro bids are cited around the US$ 1.2475 level.
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