Eurozone tensions continue to act as a weight on global market sentiment and the EUR. Talk of a delay of part or all of the second Greek bailout until after elections in April has intensified speculation of a disorderly Greek default. Chinese support for Europe expressed yesterday has done little to alleviate the strain. Attention will now turn to the meeting of the Eurogroup in Brussels on Monday.
Relatively positive US economic data including a jump in the NAHB homebuilders survey to its highest level since May 2007 and hints by Federal Reserve officials of support for more quantitative easing in the minutes of the Jan 24-25 FOMC meeting have failed to outweigh negative developments in Europe.
A ‘risk off’ tone will filter through markets today. Data wise, US Philly Fed and housing starts will continue the positive tone of US releases, while in Europe bond auctions in France and Spain will be watched closely.
Australian jobs data for January came in stronger than forecast, rising by 46.3k compared to consensus of 10k. The unemployment rate surprisingly dropped to 5.1%. The increase in jobs more than made up for last month’s disappointment and highlights some signs of stability in job market conditions. Moreover, the data supports last week’s decision by the Reserve Bank of Australia (RBA) to keep rates on hold.
AUD jumped on the data but I expect the follow through to be limited especially given the fact that the AUD remains one of the most sensitive currencies to risk aversion. Upside will be restrained to resistance around 1.0788 versus USD today.