Risk currencies bounce on Euro-region bank-resuce talk; U.S jobs data in focus

After another less than inspiring week across the risk spectrum, we’ve seen talk of a rescue fund for troubled Euro-region banks assist risk currencies to bounce back in early trade. Reports suggest the plan involves taking control of Europe’s struggling bank’s and importantly funding will be levied on the same banks the rescue funds will support – a crucial clause given German resistance to any further taxpayer funded initiatives. There’s also talk Italian Prime Minister Mario Monti will accompany this with a proposal to guarantee deposits to Euro-Zone banks in an effort to avert further wide-spread withdrawals across Europe’s vulnerable banking system. Nevertheless, the week ahead will almost certainly be driven by Eurocentric headlines with the Greece’s dilemma’s threatening to reach critical mass levels with each passing day. Alongside a number of mid-tier data points, the health of Europe’s largest economy will be in focus with German CPI and unemployment data on the docket with ECB President Mario Draghi also due to give a speech.

Across the Atlantic, the health of U.S employment will also be in focus with non-farm payrolls due on Friday but not before a series of jobs relative precursors throughout the week to guide expectations with weekly jobless claims, ADP private sector gauge and Challenger job cuts on the bill. The U.S economy is expected to have created 150,000 new jobs in May from a previous 115,000 with the official unemployment rate expected to remain at 8.1 percent. Also in focus this week will GDP and core consumer expenditure (Thursday) with ISM manufacturing gauge due on Friday. The key directive from a local perspective will be retail sales due for release on Wednesday with Private sector credit and AIG manufacturing data due on Thursday. Official Chinese manufacturing PMI along with the HSBC equivalent will be key to the local unit’s movements on Friday.

We’re seeing wide-spread support for risk currencies in early trade with Euro making a solid break to the upside of $US1.25 after forging fresh 23-month lows of $US1.2495 on Friday. The Euro is currently buying $US1.2565. This has also promoted strength across high beta currencies with the Aussie and Kiwi rallying in unison. At the time of writing the Australian dollar is buying 98.1 US cents.