Euro Struggles At 1.22, Retail Sales Next

ECB changes stance on bond losses; eurozone CPI steady and surplus rose; Swiss industrial production lower; Spanish and Italian yields rise. Market turns to retail sales, empire state manufacturing and Canadian international transactions. 1 of 2 EUR/JPY and cable hit all targets. All other 8 trades are in progress. 

The greenback trades stronger against all majors except for JPY. Major European equities trade about 0.25% lower and the relative strength winner is JPY while EUR lags.

With Tokyo closed in observance of the Marine Day, the FX market traded in a narrow range throughout Asia. When London traders got to their desks they started to buy the USD and sent the euro back to below 1.22. Commodity dollars are also weaker but to a smaller degree. USD/JPY fell below 79.00.

Weighting on the common currency was a story published on WSJ that suggests that the ECB now favors imposing losses on senior bondholders if Spanish troubled savings banks were liquidated. In case of Ireland, senior bondholders were protected. The ECB declined to comment.

Eurozone annual CPI was steady and in line with expectations in June at 2.4% and core CPI stayed at 1.6%. Eurozone trade surplus rose to EUR 6.3 bln in May from downwardly revised Aprils EUR 4.5 bln as exports rose 6% while imports were unchanged. EUR/USD trades near session lows around 1.2190.

In other news, Swiss industrial production only rose 1.4% in Q1 y/y after growing 3.6% in previous quarter and Spanish and Italian 10-year yields are trading near session highs at 6.75% and 6.09% respectively.

The US session starts at 9:30 am ET with June retail sales that are expected to rise 0.1% after declining 0.2% a month earlier. Core sales are also seen higher by 0.1% from previous -0.4%. Empire state manufacturing is anticipated at 3.9 in July after June's 2.3 and business inventories at 10:00 am are expected at 0.2% in May after 0.4% in April.

Canadian international securities transactions are due at 8:30 am and are seen higher in May at CAD 13.5 bln from previous CAD 10.2 bln.