Following on from Friday, currencies have kicked off the week in a risk-off fashion with the greenback extending gains against major counterparts. Friday's U.S. jobs data induced fresh fears the economy may not be able to avert a recession, in turn promoting strength from safe-haven plays. The U.S. economy failed to create any jobs in August falling short of the economist's estimates of 68,000 new positions. Contrary to the wider market expectations, the weaker than expected jobs data failed to inspire any stimulus-induced US dollar weakness, given the greater than even odds the Fed may step in to resuscitate the economy with a fresh round of stimulus.
Risk currencies are today weaker across the board with the Aussie and Kiwi leading the way lower coinciding with weakness from regional equities. At the time of writing the Australian dollar is buying 106 US cents.
From a macro perspective, the week ahead is littered with top tier data and market moving themes to guide the way, with interest rate decisions from Australia, UK, Euro-zone and Canada on the docket. Given the extreme levels of global uncertainty clearly this represents a cautionary time for central banks, which are all expected to keep rates on hold at their respective meetings. In a recent testimony to the House of Representatives, RBA governor Glenn Stevens surprised investors with a tone of neutrality suggesting the global economic uncertainty warrants sitting on the sidelines rather than a reduction of benchmark interest rates - as built-in to local money markets.
The local week will also see the release of Q2 GDP on Wednesday which is expected to show growth of 1.0 percent from a previous contraction of 1.2 percent. Jobs data on Thursday will no doubt be a primary market moving theme with the local economy expected to have created 10,000 jobs in August. The Aussie dollar will also be highly reactive to inflation data out of China on Friday with economists predicting consumer prices to fall to an annual pace of 6.2 percent from a previous 6.5 percent.
In a reasonably light week for economic feedback in the US, market participants will look to President Obama for inspiration as he unveils his job creation plans in a speech on Thursday. One would expect any grand plan put forward will be met with resistance from the Republican Party which may temper any short-term positivity to be derived.
Across the Atlantic, there's no shortage of event risk with Euro-zone retail sales, GDP and German CPI on the bill. Market participants will also be listening closely to the outgoing European Central Bank President Jean Claude Trichet on Thursday in his post interest decision address. Wednesday will see all eyes on the Euro-zones largest economy, Germany, with the Federal Constitutional court due to deliver a ruling to determine if Berlin has breached German law by participating in the bailouts of Greece, Ireland and Portugal.