After a period of mild decline, last week saw the Aussie find its legs once again to record solid gains against major counterparts. The local unit rose over 2 percent over the week against most majors after the RBA's rates decision and subsequent monetary policy statement provided a somewhat hawkish outlook. Whilst acknowledging the economic implications of the flood devastation in Queensland the Reserve Bank provided a largely optimistic growth outlook with much of the economic impact from the flood devastation to spring back to life in the June quarter. The local unit's had a new lease on life and by default the window of opportunity to forge new highs remains open. Of course, local factors are not the only part to the equation - Friday saw the appeal of the US dollar revived after US non-farm payroll data which has weighed on the Aussie.
US non-farm payrolls rose by 36,000 in January falling well short of estimates of 146,000 new payrolls. Market participants weighed a meagre jobs number with a steep drop in the unemployment rate which fell to 9 percent from a previous 9.5 percent due to a fall in the participation rate. The underwhelming jobs number has been attributed to horrific winter conditions effectively paralysing jobs growth in central thus delaying hopes of near-term rebound in employment growth. Nevertheless, the drop in the employment rate can also be seen as a positive precursor to employment growth once seasonal factors dissipate, rendering the chance of a sustained rebound more likely. Whatever the case, it was a bitter sweet result and translated as such to the greenback. The ensuing period of the release saw a swift fall in the US dollar, followed by a sustained period of strength as market participants digested the news - nevertheless market sentiment was able to bounce back allowing US equities to finish in the black.
Friday saw the Euro take a second leg-down in as many days against the greenback after US non-farm payrolls. Recent weeks have seen a sharp upward trajectory from the Euro as central bankers signalled a willingness to raise interest rates should inflationary pressures remain firm. However last week ECB president Jean Claude Trichet dampened conjecture over a near-term rate hike suggesting the recent spike in consumer prices is short-term with inflationary pressures over the medium to long term should remain contained. In an effort to further restore economic confidence in troubled European peripheral's, key leaders reconvened in Brussels, Belgium on Friday with leaders vowing to make important steps by the end of March to improve its budget rules and agree steps to improve the competitiveness of Euro-zone economies.
Local economic data this week includes today's ANZ jobs ads and Retail sales for December. The main event this week employment data which is expected to show the Australian economy created 20,000 new jobs in January against previous growth of 2,300. Thursday will also see the release of trade data from China with the HSBC Services PMI due earlier in the week. At the time of writing the Aussie dollar is buying 101.3 US cents.