ASX futures fell 0.2 per cent — with European markets, which closed lower, providing a weak lead for the local bourse.
Most of the overnight action occurred in currency markets, as Wall Street investors took the day off for Martin Luther King Day.
Aussie dollar may rise with jobs
The Australian dollar rose 0.7 per cent to 79.7 US cents at 7.20am (AEDT).
It has jumped by more than 6 per cent since early-December — and by around 2 per cent in the past fortnight.
The local currency has also lifted against the British pound (+0.3pc), euro (+0.2pc), Japanese yen (+0.2pc) and New Zealand dollar (+0.1pc).
Whether it rises further this week may depend on the jobs and unemployment figures, which the Bureau of Statistics will release on Thursday.
“The consensus looks for jobs growth of 15,000 in December, following November’s very strong 61,600 increase,” said NAB economist Tapas Strickland.
However, NAB’s forecast on jobs creation is more optimistic than the consensus view.
“NAB thinks there is upside risk to the consensus this month and is forecasting a bumper 35,000 on the back of strong forward indicators and favourable sampling characteristics.
“While we expect the unemployment rate to be unchanged at 5.4 per cent, the trend is firmly lower in 2018.”
Greenback falls, while euro surges
One reason for the Australian dollar’s recent strength is that the US dollar index has fallen to a three-year low against a basket of currencies.
Meanwhile, the euro hit a three-year high, with investors feeling increasingly optimistic that the European economy will rebound this year — particularly after comments made by one of its key central bankers Ardon Hansson.
Mr Hansson, who is also Estonia’s central bank chief, suggested that quantitative easing could end in September, if the European economy and inflation continues to improve.
“If growth and inflation is evolving more or less in line with the projections, it would certainly be conceivable and also appropriate to end the purchases after September,” he told German newspaper Boersen Zeitung on Monday.
It is widely expected that the European Central Bank (ECB) will, this year, start to unwind the massive monetary stimulus which it pumped into the economy since the global financial crisis.
The ECB’s bond purchase scheme is worth about €2.55 trillion ($3.93 trillion).
Many economists are surprised by the recent US dollar weakness, according to Felicity Emmett, ANZ’s co-head of Australian economics.
“The recent appreciation in the euro [against the US dollar] has caught many by surprise, particularly at a time of still decent US dollar data and expectations for ongoing Fed policy normalisation,” she said.
“In the past week alone, it has bounced close to 3 per cent, which perhaps suggests some caution is necessary.”
The weaker US dollar has also boosted the gold to a four-month high.
The precious metal was trading slightly above $1,339 US dollars an ounce.