Canada GDP, Chicago PMI Next

Direct recapitalization of banks and Eurozone wide banking supervision; periphery yields decline; German retail sales fall and Eurozone CPI steady. Market turns to German vote, core PCE, personal spending, Chicago PMI and Canadian GDP. Link to Aahraf's London seminar on Saturday is below.

The greenback trades sharply lower after EU leaders introduced a plan for a region wide financial supervision by the ECB and a mechanism that will allow the EFSF/ESM direct recapitalization of troubled banks. EU leaders also agreed to relax repayment rules for loans to Spanish banks and allowed a degree of flexibility with austerity conditions, MNI reports. Reports also said that the ESM would not have preferred creditor status in case of Spanish aid.

Spanish and Italian 10 year yields initially declined but started to move up again (currently 6.61% and 5.94%). European Equity indices are still trading sharply higher, some by about 2.5% but moved off their highs. There has been no follow-through on the fx front either.

The EU summit in Brussels continues today so markets are likely to react to headlines with more accurate details. Traders will also focus on German parliament that votes today on the ESM and fiscal compact bills.

In other news, German retail sales declined in May 0.3% from previous -0.2% m/m (-1.1% from -4.3% y/y), Swiss KOF economic barometer improved in June to 1.16 from 0.60 and Eurozone CPI was steady and in line with expectations in June at 2.4%.

LINK TO ASHRAF'S SATURDAY SEMINAR IN LONDON:

http://seminars.cityindex.co.uk/cgi-bin/seminars.cgi?rm=show_event_details&se_id=956&interaction_id=4

The NY session starts at 8:30 am ET with core PCE that is seen higher in May at 0.2% from previous 0.1%. Personal spending is anticipated to slow to 0.1% from previous 0.3%.

Chicago PMI is due at 9:45 am and it is expected to rise marginally in June to 52.8 from 52.7 and consumer sentiment that comes 10 minutes later is expected to be revised higher to 74.2 from initial 74.1.

Canadian GDP is due at 8:30 am ET and it is expected to rise in April 0.2% from previous 0.1% m/m (1.8% from 1.6% y/y).

-Patrick Urban