The euro is making a comeback, and the USD, and yen under pressure after the Basel Committee unveiled new worldwide capitalization stands which the industry deemed less harsh than expected.

Although the fine details have yet to be hammered out, regulators from 27 counties agreed to a 7% capital ratio for banks, and that the new standards will be phased in over eight years. The Committee also said that additional requirements could be levied on firms deemed too big to fail.

News of the announcement sparked a global equity rally which fed into a 1.1% gain in EUR/USD, followed by USD/CAD falling 0.7%, and AUD/USD rising 0.7%.

The move into risk assets is also being bolstered by some better than expected economic data from China. Industrial production unexpectedly accelerated to a 13.9% annual growth rate in August despite calls for a slowdown to a 13.0% growth rate from 13.4% the month prior.

There had also been some speculation over the weekend that the People’s Bank of China would tighten monetary policy in a bid to slow economic growth, but in the end the central bank remained silent, giving the risk seekers more reason to sell the USD and yen.
 

In the absence of any major economic news from Europe or North America on Monday, the risk traders remain firmly in charge. Look for ongoing gains in the U.S. equity markets to continue weakening the greenback and yen, while any slowdown in the momentum could cause both currencies to take back losses.