CANADA FX DEBT-C$ firms as trade deficit narrows, ECB comments dominate

* Canadian dollar at C$1.3252 or 75.46 U.S. cents
    * Bond prices mostly higher across the maturity curve

    TORONTO, Sept 3 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Thursday, supported by a
smaller-than-expected trade deficit in July in Canada and
comments from the European Central Bank that dominated currency
market moves and battered the euro.
    Canada's export sector posted healthy growth for the second
month in a row in July, helping cut the country's trade deficit
to an eight-month low of C$593 million, significantly less than
the C$1.30 billion economists had forecast. 
    Market participants were hoping the closely watched trade
figures would offer a clearer picture on whether the impact of
cheap crude has been contained and whether a soft Canadian
dollar has helped stimulate other parts of the economy, such as 
    Following the data, markets were pricing in a lower
probability the Bank of Canada would cut interest rates by 25
basis points for a third time this year at its next meeting in
    Overseas, the ECB kept its 60 billion euro a month asset
purchase limit unchanged, but said the euro zone economy was not
recovering at the pace expected. President Mario Draghi said
economic conditions had worsened since mid-August.
    * At 9:32 a.m. EDT (1332 GMT), the Canadian dollar 
was trading at C$1.3252 to the greenback, or 75.46 U.S. cents,
stronger than the Bank of Canada's official close of C$1.3271,
or 75.35 U.S. cents.
    * The loonie traded between C$1.3245 and C$1.3289 so far
during the session.
    * The U.S. trade gap also narrowed in July to $41.9 billion,
its lowest level in five months, as exports rose broadly,
signaling underlying strength in the economy amid concerns about
a global growth slowdown. 
    * U.S. and Canadian employment data for August are due at
08:30 a.m. EDT on Friday.  
    * The Canadian dollar, which was outperforming nearly all of
its key currency counterparts, is expected to trade between
C$1.3220 and C$1.3320 against the U.S. dollar on Thursday,
according to Royal Bank of Canada.
    * Canadian government bond prices were mostly higher across
the maturity curve, with the two-year price up 0.5
Canadian cent to yield 0.413 percent and the benchmark 10-year
 rising 1 Canadian cent to yield 1.453 percent.
    * The Canada-U.S. two-year bond spread was -28.3 basis
points, while the 10-year spread was -71.9 basis points.

 (Reporting by Solarina Ho; Editing by Andrea Ricci)