This week has more potential for shaping longer-lasting currency direction than any week this year. We say this because of the market's fascination with the perceived turning point for global growth, which received a further stroke earlier today from a private Chinese survey. The core view today is one of an incremental shift towards recovery, which is weakening the Japanese yen further. Much of Europe is closed today for vacation, while Japan descends into Golden Week in respect of the aged.

We can expect to see rising unemployment a feature for the U.S., Canada and Australia throughout this week although based upon data refuting further economic weakness it's less likely that the pace of job losses will accelerate. But that doesn't mean that joblessness won't continue rising through year-end. The market will cling to the argument that the end of the tunnel is within sight and risk appetite will likely remain afloat.

Last week the official Chinese purchasing managers index (PMI) delivered a second straight monthly reading of expansion. Since this index is heavily weighted towards state-owned industry its outcome is more sensitive to fiscal stimulus spending. And so today's private reading of another PMI from CLSA Pacific Markets, was keenly watched to understand whether the private sector was feeling the second round impact. This PMI reading of 50.1 in April compares to 44.8 in March and indicates the first above 50 expansion in nine months. Coupled with rising auto sales and expansion of private credit the stars are aligning for the Chinese government eager to replace lost export demand.

The survey noted a moderation in the decline of export orders and a surge in investment directly related to the $586 billion government stimulus package. The good news helped lift Shanghai stocks higher by 3.3% and while this is good news for China, it's in tune with other global data heralding a slowdown in the pace of contraction.

The impact sent the Aussie dollar higher to 73.67 cents against the dollar. The Reserve Bank of Australia is expected to leave rates on hold at its meeting on Tuesday, while Thursday's reading of employment will likely show 25,000 jobs lost during April.

The Japanese yen fell to ¥99.40 against the dollar. The currency retains a strange logic. Risk aversion around the globe encourages investors to buy the yen and therefore exacerbate the domestic crunch. Meanwhile, an expansion of risk appetite creates the desire to relinquish yen holdings (or sell the yen short), which has the positive impact of reducing the noose-hold around the economy's neck. And so in either direction the impact of currency movements creates a spiraling effect, likely to exacerbate the better or weaker health of the economy. Arguably the ¥100 level of the yen could be seen as a point at which investors are repelled either way from the yen. In other words, that price is deemed neutral and investors will come down heavily chasing the yen rapidly higher or lower away from that point.

The U.S. will deliver its own non-manufacturing ISM survey Tuesday, which will still display contraction. However, investors' reaction to a slower pace of contraction will likely be key. The euro is weaker to start the weak following a European Commission downgrade to the Eurozone's growth prospects over this year and next. They now expect a 0.1% slowdown in 2010 hitched to a 4% rate of contraction this year. Meanwhile the German Federal Statistics Office released an unexpected 1% slowdown in retail sales for March. Both factors will most likely be up for discussion on Thursday when the ECB meets to discuss monetary policy. Investors stepped up to buy the euro, which is currently trading at $1.3313 while the Japanese yen is weaker at ¥132.40. With three days to go before the ECB addresses the potential for quantitative easing investors don't seem to be overly concerned that the euro will suffer.

The Bank of England also meets on Thursday, with no one anticipating any change in its monetary stance. The recent statements from this central bank have been extremely dour and glossed by the dire state of public finances leading to a rather ugly looking borrowing requirement. Still, fiscal woes appear to be baked into the cake and investors appear keen to attempt an assault on $1.50, with sterling trading at $1.4962 today.