The euro rallied as increased demand at Spain’s bond auction waned fears about the country's ability of refunding in the market. The single currency also drew support from dollar's broad-based weakness and rose above 1.24 for the first time in almost three weeks.

The single currency rallied to a 3-week high of 1.2413 on active short-covering (stops at 1.2340 and 1.2360 were triggered) as worries about Spain's public finances were eased by a well covered bond auction (the 30-year Spanish bond drew bids 2.45 times the amount of securities on offer, compared with 1.38 times in the previous auction in March). Dollar's weakness against Swiss franc also supported the euro as the Swiss National Bank relaxed its interventionist stance and said deflationary risks in the Swiss economy had all but disappeared. The pair eventually closed the day up at 1.2388.

In other news, European Union leaders reached agreement at the summit in Brussels that the results of stress tests of banks would be disclosed in July as a move to show investors that the financial system could withstand shocks and EU's Barroso said he was confident in overall resilience of European banking industry in the EU Summit. French President Nicolas Sarkozy said that he had confidence that Spain would not need the bailout like Greece.

Versus the Japanese yen, the greenback remained under pressure in Asia and Europe and fell to 90.51 after the release of higher-than-expected U.S. weekly jobless claims data which rose to 472,000 against the consensus forecast of 450,000 from 460,000 prior week. The pair was pressured further due to the decline in U.S. equities after the release of weaker-than-expected U.S. leading indicators in May and U.S. Philadelphia Fed business index in June, which came in at 0.4 and 8.0 versus economists' forecast of 0.5 and 20.9 respectively. The pair rebounded strongly from the said low and ended the day at 91.00. DJI pared all initial losses and ended the day up by 0.24% at 10434.17.

The British pound remained under pressure initially in Asia on Thursday by the mildly dovish comments by BOE Governor King and UK Finance Minister Osborne's announcement of a financial shake-up together with British oil giant BP's announcement of suspending dividend payments on Wednesday. Cable tumbled to 1.4646 in European morning on Thursday but the pair took a U-turn on dollar's broad-based weakness and upbeat U.K. retail sales data which rose by 0.6% m/m and 2.2% y/y versus economists' forecast of 0.1% m/m and 2.0% y/y respectively. Cable eventually rallied to 1.4838 in European mid-day before easing.

Swiss National Bank kept interest rates unchanged as widely expected at 0.25% and said inflation forecast showed short-term price stability guaranteed, however, SNB raised 2010 Swiss GDP growth forecast to around 2% versus previous consensus forecast of around 1.5%. The greenback tumbled against Swiss franc from 1.1330 to 1.1095 due to active cross buying in chf (eur/chf nose-dived from the intra-day high of 1.3927 to 1.3742, 7 pips above the lifetime low of 1.3735 made on 9th June). In other news, UBS clinched approval from Swiss lawmakers to hand over confidential data on suspected tax dodgers to American officials. UBS had admitted it had used hidden offshore bank accounts to help thousands of Americans evade taxes on about $20 billion of income.

Economic data to be released on Friday include Germany PPI , U.K. PSNCR and PS net borrowing , Canada Leading indicators.