Fresh from vacation, overnight German Chancellor Angel Merkel echoed recent comments from ECB President Mario Draghi, saying "we feel committed to do everything we can in order to maintain the common currency." In a further display of solidarity, Merkel also said the recent European Central Bank decision to reboot peripheral bond-buying operations on a conditional basis is "completely in line with what we've said all along." After easing throughout the week, European equities were able to resume an upside trajectory with the Euro STOXX50 index closing over 1-pecent higher. In economic news, Euro-Zone consumer prices rose 2.4 percent in July from a year earlier, while core prices which excludes the volatile food and energy components rose 1.7 percent - both releases were in line with estimates.

Across the Atlantic, U.S building permits surged 6.8 percent in July, outpacing expectations of a more moderate rise of 1.2 percent to represent 4-year highs. Housing starts recorded slightly lower growth than anticipated.  While there may be tentative optimism surrounding the housing recovery, the latest Philadelphia Fed gauge of manufacturing didn't resemble the same level of positivity with the index falling to -7.1 in August from -12.9 in July.

Nevertheless, once again the common denominator behind market buoyancy is the premise of stimulus from the world's largest economies. There's also a degree of hope surrounding the growth prospects of the world's second-largest economy, China, after Premier Wen Jiabao was quoted as saying "we have the conditions and capabilities, and will be sure to fulfill this year's economic and social development targets," while in the same breath warning "the foundation for economic stabilization is still unstable, and that economic hardships may continue for some time." Despite the political complexities surrounding the change of leadership this year, this may suggest the Chinese authorities are building specific policy measures to keep growth consistent with their 7.5 percent target.

After waning earlier this week, comments from Chancellor Merkel and general stimulus conjecture assisted the Euro to regain some of its lustre, with strength against the greenback, yen, and Aussie leading the charge higher. The Aussie dollar was outpaced by its commodity counterparts the Kiwi and CAD, but was well-supported against safe haven currencies the dollar and yen. The mild risk-on environment was confirmed as USDJPY squeezed above Y79-figure with the pair moving to highs around Y79.4. With little in the way of key local directives and in consideration to already light liquidity, we expect another lethargic Friday before we're once again at the mercy of European and U.S markets to guide the way. Technical's show short-term support at 105 US cents with bidders around 104.75 likely to contain losses should regional equities get a little heavy. At the time of writing the Australian dollar is buying 105.10 US cents.

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