EURUSD Regains 1.23 as Spain Secures EUR 30 bn

Periphery yields decline; UK industrial production above expectations & trade gap narrows by more than expected; German constitutional court decides on ESM case. Commodity Currencies pushing higher. US session brings Canadian housing starts and IBD/TIPP economic optimism index. Detail on the latest Premium Insights are below.

JPY remains the best performing G10 currency so far this month, but today, the strength is dominated by commodity currencies, led by SEK, AUD, NZD and CAD. Year-to-Date, NZD is the best performer, followed by CAD, AUD and GBP.

Market sentiment improved during the London session after periphery yields and spreads declined below key levels. The Italian 10 year broke back below 6% and Spanish counterpart below 7%. Risk was also boosted by UK manufacturing and industrial data that bested expectations. UK manufacturing production rose sharply in May 1.2% from previous -0.8% m/m (-1.7% from -1.5% y/y) while industrial production rose 1.0% from -0.4% m/m (-1.6% from -2.0% y/y). Trade deficit narrowed to GBP 8.4 bln from April's GBP -10.1 bln.

Gauging the strength of industrial production is difficult though as May had one additional working day because a bank holiday was moved from May to June. Next month could see a sharp fall as June lost two working days due to the Jubilee celebrations. Data for June will be published on August 9th. GBPUSD rose after the release from 1.5500 to 1.5540.

Other data showed that French industrial and manufacturing production declined both on monthly and yearly basis while Italian industrial production improved. Unconfirmed reports also suggest that the next tranche of the Greek aid could be delayed to mid September.

The German Constitutional Court is scheduled to publish its verdict on the case against the ESM and fiscal compact. An approval is necessary before the president can sign it into a law so it can become operational. The latest headlines suggest that the decision could be delayed.

The US session starts at 8:15 am ET with Canadian housing starts that are expected to decline in June to 203K from previous 211K followed by NIESR estimate of UK June GDP at 10:00 am.

The US data is limited to the IBD/TIPP economic optimism index that is also due at 10:00 am and it is seen marginally higher at 46.9 in July from June's 46.7.

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