It's a solid start to the week for the Aussie dollar with price action moving up through 107.50 US cents earlier this morning in an extension to gains recorded in Fridays session. To recap the events of Friday, US nonfarm payrolls recorded meager 54,000 new jobs in May from a previous 251,000 to fall short of the 165,000 estimated. Private payrolls also failed to live up to expectations with the private sector creating 83,000 new roles against an estimated 170,000. The ensuing period of the release promoted US dollar strength against risk currencies however initial reaction were quickly met with equally impressive weakness.

The Aussie dollar took an immediate hit in minutes that followed the release to fall below 106 US cent for a brief period; however the local unit began a slow north-bound trajectory and recovered losses before tapering off towards the close of business to finishing the week at 107.15 US cents.

From a macro perspective the local week ahead will see the much anticipated Reserve Bank's interest rate decision on Tuesday with local employment data coming up on Thursday. Tuesday's rates decision should prove to be as influential a decision on the Aussie dollar as they come - market participants are increasingly divided as to whether the RBA will do some pre-emptive tweaking or chill on the side-lines until the August meeting in which they will have the benefit of further understanding on inflationary pressures in the second quarter. The latter makes perfect sense given the host of contradicting data in recent times - however the RBA have recently expressed their intention to "look through" what was expected to be a quarter of uneven economic activity given the recent spate of natural disasters. Besides the banks famously proactive reputation, there have been some ticks in the 'for' column which has some well reputed rates projectionist tipping for a hike as soon as July. Last week's dramatic fall in Gross domestic product has also failed to stop the rates conjecture heating up with many predicting the 1.2 contraction in 1Q will come back in equally impressive style in 2Q.

Although there are convincing reasons that point to a June/July hike, the August meeting would be the happy-medium; this also implies the RBA may begin to prepare the market for a near-rate hike - which in itself will likely promote strength in the local unit.

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