The outlines of the US bank restructuring plan were leaked last night and the market reaction has been positive. Risk aversion continues to recede as credit markets begin to thaw. The US has thrown billions of capital at US banks, both those that need it and those that don’t. The idea is to remove any stigma associated with the acceptance of government capital.
EUR/USD is holding below Monday’s 1.3780 high but USD/JPY has exploded, dragging EUR/JPY up to the 141.50 area. Spot edged above 103.00 before consolidating. Commodities currencies are way up as well, as one would expect; this is a measured of receding panic. Equities are up better than 5% on average across Europe and interest rates are soaring as money moves out of Treasuries into “riskier” assets.