The Australian share market is tipped for a positive start on Monday following a 14 point gain by the ASX 200 Futures Index overnight.
AMP Capital's chief economist Shane Oliver said the gain followed Friday's rally on Wall Street.
The Dow Jones, S&P 500 and Nasdaq were all up largely in response to weaker than expected US inflation data, Dr Oliver said.
"The fear the Fed will raise interest rates too quickly has rapidly faded," he said.
"The rally on Wall Street continues and that will likely flow over onto our market on Monday."
Australian stocks are expected to see a gain of approximately 14 points (0.2 per cent) at the open on Monday.
The Australian dollar's surge past $US0.78 also continued overnight.
Dr Oliver said Canada's interest rate increase coupled with the news US rates would remain on hold and continued growth in the iron ore price had all pushed the Australian dollar to its two year high.
The Australian dollar's up swing is expected to carry on in the short term as buyers are attracted to the currency.
Strong jobs figures on Thursday could also push the Australian dollar higher but if they disappoint it may pull back below the $US0.78 mark Dr Oliver said.
With mining investment falling, robust growth by the Australian dollar could make life difficult for the Australian economy with key exports such as tourism and education likely to suffer.
Dr Oliver said he expected Thursday's Australian Bureau of Statistics labour force figures to reveal reasonable growth of around 10,000 jobs.
The unemployment rate will push from 5.5 per cent up to 5.6 per cent largely due to a rebound in the participation rate, he said.
"There is a bit of a risk we might see a softer number," Dr Oliver said.
The benchmark S&P/ASX 200 Index closed 0.49 per cent up on Friday, while the broader All Ordinaries Index rose 0.51 per cent reflecting a solid 1.1 per cent gain over the past week.
The ASX 200 closed at 5,765.1 points while the All Ordinaries closed at 5,808.7 points on Friday.
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