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Australia rates, US jobs are key market risks this week

A woman walks past the Reserve Bank of Australia sign in Sydney, Australia.
William West | AFP | Getty Images
A woman walks past the Reserve Bank of Australia sign in Sydney, Australia.

The spotlight in the Asia-Pacific region this week falls on Australia, where a flurry of economic data, including employment, trade and retail sales for April, are scheduled for release.

The Reserve Bank of Australia (RBA) meets on Tuesday and once again, analysts say it's a toss-up whether the central bank will unveil another rate cut, after lowering interest rates to a record low of 2.25 percent by 25 basis points in February.

While there's an even chance the RBA could hold off cutting rates, given strength in pockets on the country's property market, Moody's Analytics says the central bank will likely opt for easing.

"Cutting rates will further take the shine off the Australian dollar, necessary to help the export‐facing service sectors improve. On balance, we expect the central bank to cut rates and will work alongside the financial regulator to dampen dwelling-price growth in the worryingly strong sectors," Moody's analysts wrote.

However, HSBC is expecting the central bank to stay put, as March's inflation print of 1.3 percent "isn't low enough to be an obvious trigger for a cut," said chief economist of Australia and New Zealand Paul Bloxham.

Read MoreAustralia's AAA rating not in danger: Hockey

Rest of Asia

The health of the Chinese economy will also be on the market's watch list, with the final China HSBC purchasing managers' index (PMI) due on Monday, trade data on Friday and inflation numbers on Saturday.

China's official PMI for April topped expectations, coming in at 50.1, while HSBC's preliminary reading fell to 49.2, showing the massive manufacturing sector still struggling despite increasingly aggressive policy easing by the central bank.

For April's consumer inflation, Moody's Analytics is forecasting a rise of 1.5 percent on-year, a tick higher than March's 1.4 percent gain. Wholesale prices could contract 4.6 percent, unchanged from the preceding month, Moody's forecast.

Meanwhile, Indonesia's economic growth may have slowed to 4.95 percent on-year in the first quarter, according to a Reuters poll of economists, as domestic and export demand softened amid a tumble in global commodity prices.

Read MoreJobs report is big but watch out for Europe

Jobs to push Fed off the fence?

Beyond the region, all eyes will likely be on Friday's U.S. nonfarm payrolls report, which comes on the back of a surprisingly soft first-quarter GDP print. The report will offer clues on the state of the U.S. economy and its capacity to withstand rate increases.

Last week, Commerce Department data showed the U.S. economy grew just 0.2 percent in the first three months of 2015, which led the Federal Reserve to keep mum on guidance for its first rate hike in the April statement.

"The Fed acknowledged slower growth, but felt this reflected transitory factors such as the unseasonably cold weather in the Northeast, a stronger greenback and potentially weaker investment due to lower oil prices. It also sounded cautious on the labor market, suggesting they will be accommodative for a while yet," IG's chief market strategist Chris Weston wrote in a note last week.

As the Fed will want to monitor growth in the second quarter before pulling the trigger, a June lift-off in interest rates seems off the table, with September being more likely, Weston added.

A Reuters poll expects the U.S. to add 208,000 jobs in April, after posting its worst report since December 2013 in March with the creation of 126,000 jobs.