A noteworthy exception may include Wednesday’s highly-anticipated Employment Change report; after January’s massively surprising gain, markets will wait to see whether the domestic job market continued adding jobs through the month of February. Consensus forecasts currently call for a 15.0K net gain in jobs through the month—the smallest such addition since the country lost 23.2K jobs in August, 2009. Certainly after five consecutive months of truly impressive advances there is ample room for slowdown. That being said, however, any especially large disappointments could hurt outlook for future growth and higher interest rates.
The Australian Dollar has recovered an impressive 60+ percent of its January-February declines against the US Dollar, and short-term momentum favors further gains. Whether or not those gains materialize will almost solely depend on the trajectory of risky asset classes and broader risk sentiment. As the highest-yielding G10 currency, the Australian Dollar has enjoyed considerable speculative interest as global investors seek high rates of return. Yet the “carry trade” is a very risky and cowardly strategy; investors often bail at the first sign of danger. Thus it will be critical to watch whether the S&P 500 can challenge its 2010 highs—a break higher would likely fuel further AUD/USD gains. - DR
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