The key market driver to wrap up last week came as ratings agency Standard & Poor's cut debt ratings of nine Euro-zone nations including Europe's second largest economy, France. Both France and Austria were downgraded from Triple-A to Double-A+ with Malta, Cyprus, Italy, Slovenia, Slovakia, Spain and Portugal also in the firing line. A concession to the latest round of downgrades was confirmation of Germany's stable outlook with no change to the Triple-A status of Europe's largest economy. S&P said In our view, the policy initiatives taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone. Meanwhile, Greece re-entered the spotlight with reports that negotiations have stalled between the Government and the private sector over the planed debt restructure.

Market participants may have been well informed of further ratings cuts on the horizon, however Friday's cut of French debt serves as a reminder the crises has infiltrated core Euro region economies. In turn, this raises doubts over the over the Triple-A status and viability of the European Financial Stability Facility (EFSF) given its rating is contingent on the contributions given by the very economies it intended to support - this lack of faith in the constituents of the fund further undermines confidence in the region. With economic data fairly light in the region in the week ahead, the headline risk remains a key determining factor for Euro direction, with debt Auctions from France, Portugal and Spain no doubt a critical test for market sentiment.

Naturally, the downgrade has promoted resistance across Euro pairs with EURUSD falling to fresh 17-month lows of 1.2623 before regain mild composure over the course of the session. The Euro has take a second leg-down this morning - at the time of writing buying $US1.2640.

The Australian dollar followed a similar route falling to lows of 102.3 US cents but managing to claw back gains to finish above 103 US cents. We're seeing flows turn against the local unit in early trade with price action currently around the 102.8 US cents.

Among other mid-tier macro releases, the local week ahead will see the focus turn to the release employment data on Thursday. It's anticipated the Australian economy will create 10,000 jobs in December from a previous drop of 6,300 with the unemployment rate expected to remain at 5.3 percent. Along with sentiment abroad, arguably the most important theme for the Aussie dollar this week will be the release of Chinese GDP result. Chinese economic growth is expected to have moderated to a yearly rate of 8.7 percent in the fourth quarter from a previous 9.1 percent. GDP, Industrial production and retail sales will be release on Tuesday.