EURUSD Above 1.29; Trade Deficit Next

Euro ignores Spanish downgrade; AUD labor market data mixed; French CPI declined. Focus turns to trade deficit from US and Canada; jobless claims and import prices.

The greenback is weaker across the board, except JPY and has lost all of yesterday's gains. European equities are gaining 0.6% and the relative strength winner is NZD while JPY lags.

Positive sentiment helped the common currency to push higher and back above the 1.29 figure which is somewhat surprising given yesterday's Spanish downgrade by the S&P to BBB- from BBB+ with negative long term outlook.

AUDUSD gained from 1.0216 to 1.0265 after September employment was above expectations at 14.5K after previous decline by 9.1K. Rising full time employment along with a higher participation rate meant that the Aussie strengthened despite the unemployment rate that rose sharply to 5.4% from previous 5.1%. AUDUSD trades around 1.0285.

On the data front, German September CPI was unrevised at 2.0% y/y, French CPI declined 0.3% from 0.7% m/m and slowed to 1.9% from 2.1% y/y and Greek unemployment rate rose in July to 25.1% from 24.8%.

The US session begins at 8:30 am ET with trade deficit that is expected to widen slightly to USD 44.1 bln in August from previous deficit USD 42.0 bln. Jobless claims are seen marginally higher this week at 368K from last week's 367K and September import prices are anticipated steady at 0.7%.

Canadian data will include August trade deficit that is seen narrower at CAD 1.8 bln from -2.3 bln and new house price index is expected to rise 0.2% from 0.1%. Both releases are due at 8:30 am ET.

Markets also await the FOMC member and the FED governor Jeremy Stein's speech on asset purchases which is scheduled to start at 10:00 am ET. 

Patrik Urban