Forex - EUR/USD gains on soft U.S. jobs data, political impasse

NEW YORK (Oct 3)  The euro advanced to eight-month highs against the dollar on Wednesday after industry data revealed the U.S. private sector created fewer jobs than expected in September.

A political impasse in the U.S. Congress that resulted in a government shutdown also pressured the greenback lower.

In U.S. trading on Wednesday, EUR/USD was up 0.41% at 1.3582, up from a session low of 1.3506 and off from a high of 1.3607.

The pair was likely to find support at 1.3478, Monday's low, and resistance at 1.3711, the high from Feb. 1.

Payroll processing firm ADP said earlier that U.S. non-farm private employment rose by a seasonally adjusted 166,000 in September, missing expectations for an increase of 180,000.

July's figure was revised down to a gain of 159,000 from 176,000.

The numbers softened the greenback by keeping expectations alive that the Federal Reserve will continue stimulating the economy with its monthly USD85 billion in asset purchases, which weaken the dollar by driving down interest rates to spur recovery.

Elsewhere, a U.S. government shutdown ran into its second day on Wednesday due to an inability among lawmakers to approve a spending package.

Disputes surrounding President Barack Obama's healthcare reform bill kept Republicans and Democrats deeply entrenched and blaming one another for the impasse.

Concerns the shutdown will mean the official September jobs report won't publish Friday as planned also pressured the U.S. currency lower.

The euro, meanwhile, found support after Italian Prime Minister Enrico Letta survived a vote of confidence in parliament on Wednesday after Silvio Berlusconi backtracked in his opposition to the coalition.

The single currency also rose after the European Central Bank left interest rates unchanged at 0.5%.

ECB President Mario Draghi said risks to the euro zone economy remained on the downside and added the bank viewed the recovery as "weak, fragile and uneven" before reiterating that bank rates would remain at current or lower levels for an "extended period of time."

Draghi reiterated that the ECB remains ready to extend a third round of ultra-cheap loans to banks to safeguard the recovery.

Elsewhere, the euro was up against the pound and down against the yen, with EUR/GBP trading up 0.28% at 0.8375 and EUR/JPY trading down 0.15% at 132.35.

On Thursday, the euro zone is to release data on retail sales, while Spain and Italy are to release data on service sector activity. Markets in Germany will be closed for a national holiday.

The U.S. is scheduled to release its weekly government report on initial jobless claims along with data on factory orders.

Meanwhile, the ISM is to produce a report on non-manufacturing activity, a leading economic indicator.