Asian session: The euro weakened

The Dollar Index touched a one-month high after Standard & Poor’s cut Spain’s debt rating to one level above junk, boosting demand for the greenback as a haven. S&P lowered Spain’s rating by two levels to BBB- from BBB+ and assigned a negative outlook for its debt. The country’s deepening recession is limiting the government’s policy options and social discontent is likely to intensify, the ratings company said in a statement yesterday. Moody’s Investors Service on Aug. 30 said Spain’s credit rating remains on review for a possible downgrade from Baa3, the company’s lowest investment grade.

The euro weakened against most of its major counterparts before Italy sells bonds today amid concern Europe’s debt crisis is deepening.  Italy will auction government bonds today maturing in 2015, 2016, 2018 and 2025.

Australia’s dollar strengthened after data showed the nation’s added the most workers since May. In Australia, the statistics bureau said today the number of people employed climbed 14,500 in September, three times the median estimate from economists surveyed by Bloomberg News.

EUR/USD: during the Asian session the pair fell to $1.2825, but later recovered.

GBP/USD: during the Asian session the pair was trading around the level of $1.6000.

USD/JPY: during the Asian session the pair fell below Y78.00, refreshing week’s low.

At 0600GMT, German September final HICP is released, followed by Spanish September final HICP at 0700GMT. Scheduled for 0700GMT, EU Commission President Jose Manuel Barroso and EU Council President Herman Van Rompuy are to speak at a conference "The State of Europe: Escaping the doldrums", to be held in Brussels. At 0800GMT, the ECB is set to publish its October Monthly Bulletin, which is expected to largely be a repeat of the Oct 4 ECB presser statement.  At 1400GMT, back in Europe, German Chancellor Angela Merkel meets European Commission President Jose Manuel Barroso, in Berlin. The US calendar starts at 1230GMT, with the release of the Initial Jobless Claims for the October 6 week. Also at 1230GMT, the U.S. August International Trade Balance numbers are released.  At 1500GMT, the EIA Crude Oil Stocks data will be released. Later, at 1630GMT, Philadelphia Federal Reserve Bank Pres.