Risk appetite is returning to the financial markets as the good news about the eurozone takes precedence. As a result, the US dollar is heading lower as Forex traders look for higher yields. However, greenback weakness may not be lasting.
For now, the US dollar is heading lower as Forex traders rejoice in the latest plan by the European Union to create a banking union. Now, instead of relying on individual governments to bail out struggling banks, the banks can get help from a continent-wide depository guarantee organization.
This news has the euro back in favor, and the US dollar moving lower. With risk appetite high right now, Forex traders want the higher yielding currencies. However, this state of affairs may not last very long. There are still fundamental problems with what’s going on in the eurozone, and uncertainty remains. US dollar could easily regain the upper hand at the slightest intimation of bad news out of the 17-nation currency region.
For now, though, greenback is lower as Forex traders instead prefer high beta currencies with the potential for higher returns.
At 12:25 GMT the US dollar index is lower at 82.615, down from the open at 82.786. EUR/USD is up to 1.2483 from the open at 1.2451. GBP/USD is up to 1.5485 from the open at 1.5383.
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