The dollar gave back some of its gains after poor employment data sent the buck higher on increased risk aversion. Weekly jobless claims disappointed this morning as initial claims rose to 479K from 457K while the market was expecting a drop to 455k. Continuing claims printed at 4537K (cons. 4515K prior 4565K). EUR/USD dropped from session highs around 1.3235 to lows near 1.3130/35 before recovering to its current levels around 1.3185/90. ECB President Jean-Claude Trichet spoke at a press conference in Frankfurt following the ECB’s announcement to keep interest rates steady at 1%. Trichet told reporters that Europe is recovering faster than forecast stating “the available data for the third quarter are better than expected”. He went on to say that the “market is functioning a little bit better” but noted the potential for a slowdown into the end of the year which added to the euro weakness from post-claims highs.

The 1.0100 level in USD/CAD was defended as the pair made lows near 1.0105/10 before reversing higher to its current levels around 1.0175. JPY-crosses softened as U.S. equity markets drifted lower throughout the day before rising towards the end of the session. The rally did not have enough legs to take stocks into positive territory as the Dow finished the day down slightly (0.05%) and the S&P weakened by 0.13%. USD/JPY headed back towards the 8-month lows it made yesterday and is currently trading around the session lows of 85.70/75.

Commodities were mixed on the day with the precious metals gaining while oil declined by roughly 0.45% to about $82.10 a barrel keeping pressure on Canada’s dollar. The yellow metal (gold) rose marginally by about 0.10% and silver posted stronger gains by advancing about 0.37%. U.S. 10-year yields slid by almost 4 bps to around 2.91% on the decline in risk sentiment

The calendar down under has the July AiG performance of construction index and the RBA’s quarterly monetary policy statement due tonight. Also on deck for the Asia/Pacific session is Japan’s official reserve assets for July and June preliminary leading and coincident composite index.