Yesterday's comments from the ECB's Trichet that the EUR was not created to be a reserve currency was only a statement of fact.  Yet, it served as a reminder that the USD has no clear contenders for the role of reserve currency which in turn helped the USD turn away from yesterday's highs below the 1.4970 level.  Today, EUR/USD has continued to move lower hitting a low this morning of 1.4980 despite the moderately better tone of stock markets in Europe.  Risk appetite this afternoon will continue to heavily influenced by Q3 earnings but the release of the US industrial production data may also be key.  The pound has stayed in the limelight this morning.  Asian losses were largely unwound in early London hours with cable clawing back to the 1.6370 area before more selling pressure emerged.  Technically, the pound may be having a reversal week.  A close above the GBP/USD1.6125 area would suggest a significantly improved outlook. 

The EUR represents a monetary union between the participating countries.   While the budgetary criteria of the Maastricht Treaty imply a budgetary discipline, there is no fiscal union within EMU with implies the potential for friction.  There is no political union either which suggests no common ground on key aspects such as defence policy.  Without these features the EUR doesn't cut it as the dominant reserve currency, though it is feasible that its role will increase.  This morning's release of the Aug Eurozone trade balance registered a far weaker than expected â€EUR4.0 bln following a downwardly revised +EUR6.0 bln in July.  The data incorporates a 5.8% m/m sa fall in exports which will underpin fears that the strength of the EUR is hindering the ability of the region to pull itself out of the downturn.  These data suggest that further endorsement by Eurozone officials of the US Treasury's strong USD policy is almost guaranteed; some criticism of Chinese exchange rate policy may also be on the cards. 

There was no UK data released this morning leaving the market to ponder whether the improvement in the UK economy to date has really been sufficient to halt the BoE's QE program, at least for now.  Better than expected labour data and stability in housing are good news.  However, the withdrawal of fiscal stimulus next year and looming government spending cuts leaves the consumer and the broader economy horribly exposed.   From a technical perspective, the pound is beginning to look far healthier.  However, next week's Q3 GDP data coupled with the PSNCR and the BoE minutes could put the pound back in the dog house and this threat could limit upside today. 

AUD/USD has failed to hold above 0.9250 despite the candid claims from PM Rudd that interest rates are ''likely to be headed up''.  The market has been confident of another rate hike in Nov for some time now suggesting little potential for Rudd to change market positioning. 

The CAD has also come off the boil with USD/CAD consolidating around the 1.0340 area.   Clearly Canadian officials are concerned above the impact of CAD strength on the broader economy.  Today's release of Canadian CPI data will be key in fine tuning expectations ahead of next week's BoC policy meeting. 

Canadian CPI, US industrial production and TIC data and Q3 earnings will all be of interest this afternoon.