True to form, markets continued to interpret a largely inconsistent set of directives overnight, with mixed macroeconomic feedback from both sides of the Atlantic providing little in the way of clarity. Amid general optimism European leaders will finally take decisive steps to stem the regions decline, growth concerns surrounding the economic health of flagship Germany remains an important driver.

Data released overnight showed German GDP rose a seasonally adjusted 0.3 percent in the second-quarter, matching preliminary estimates. In yearly terms the German economy grew 1-percent, also unchanged from preliminary estimates. German manufacturing PMI recorded an index level of 45.1 in August from 43 in July, while services PMI fell into contraction territory from 50.3 to 48.3. Similarly, Euro-Zone manufacturing PMI rose to 45.3 in August, outpacing estimates of 44.2, while services slipped further into contraction territory, falling to 47.5.

Across the Atlantic, U.S weekly jobless claims rose by 372,000 for the week ending August 18 against expectations of 365,000. U.S manufacturing PMI rose to an index level of 51.9, slightly ahead of expectations of 51.5. U.S housing data also showed tentative signs the housing sector is waking after a six-year slumber, with new home sales jumping 3.6 percent in July from a fall of 3.5 percent in June.

On the surface it would appear a confusing set of directives has promoted a modest bout of risk aversion, however it's also important to consider the implications each data pulse has on quantitative easing expectations. Markets remain on high alert ahead of the Fed's annual Jackson Hole conference, looking for any shift in underlying data trends to quantify the likelihood of further easing initiatives. Comments from Fed's Bullard overnight also failed to provide any clarity, expressing doubt over the need for further asset purchases, suggesting he would oppose such measures in light of the recent upturn in economic data. St. Louis President Fed President James Bullard is not currently a voting member of the FOMC.

Risk trends favoured the greenback which pared some of Wednesday's losses after the Fed minutes showed members could err towards unleashing a third round of asset purchases. The Australian dollar lead the charge lower against the greenback with yesterday's less-than-inspiring China manufacturing PMI creating a key inflection point to the downside of 105-figure. The exception remained the Euro which continued its unwavering path higher against the U.S dollar, but the most pronounced gains were seen against the Aussie dollar with the EURAUD pair rising to 6-week highs. Reports Spain is in talks with European leaders in what may lead to an eventual bailout request kept the Euro in solid form, rising to 7-week highs against the greenback just shy of $US1.26-figure.

The Kiwi was the strongest of the commodity bloc which managed to suffer only moderate losses against the greenback while squeezing out gains against the otherwise in-form Euro. The next key directive for the Kiwi will be this morning's trade balance data.

The day ahead will see the focus shift to RBA Governor Glenn Stevens who will testify before the House of Representatives Economic Committee. Given the recent scandal implicating top ranking RBA officials, one would expect this to take up a fair portion of the Governors 3-hour grilling, nonetheless, investors will be closely watching Stevens for his current economic assessment and attempt to decipher how this may sway near-term interest rates. Also on the local docket is the release of the conference board leading Index for June. At the time of writing the Australian dollar is buying 104.4 US cents.

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