Domestic data due in the next week could again highlight the strength of Australia in a global economy facing renewed worries over the stability of Europe and potential steep budget cuts in the US.
Global markets were unnerved by Italy's inconclusive election results, sending Australian shares tumbling almost 1.5 per cent at the opening bell before ending about one per cent lower on Tuesday.
Voting so far in the eurozone's third largest economy shows Democratic Party leader Pier Luigi Bersani, who has indicated he will continue unpopular austerity measures, controlling the lower house.
But former prime minister Silvio Berlusconi's party, which campaigned on a populist, anti-austerity platform, appears to be ahead in the race for the Senate.
"Investors hate uncertainty, so the inconclusive Italian election result has certainly unnerved investors across the globe," Commonwealth Securities chief economist Craig James said in a client note.
If that wasn't enough, the US economy is about to be hit by $US85 billion ($A83.02 billion) in budget cuts on Friday unless Congress and the Obama administration can find a better way to address the country's massive deficit.
"The longer these cuts are in place, the bigger the impact will become," President Barack Obama told the nation's governors on Monday at the White House.
The Australian dollar held steady just under 103 US cents despite volatile market conditions.
Reserve Bank of Australia (RBA) assistant governor for financial markets Guy Debelle indicated the currency was still on the high side of where the central bank would like.
In an address to the University of Adelaide Business School, he said the RBA had been able to counter the effects of the higher dollar with lower interest rates.
"We still obviously retain scope to lower interest rates further, should the need arise, including counterbalance the pressures of an elevated exchange rate," Dr Debelle said.
But he said lowering rates too far can cause problems because it can generate an excess credit expansion or asset price inflation such has been experienced in Canada, Hong Kong and Switzerland.
"The RBA would prefer looser financial conditions to come via (a lower) exchange rate, not interest rates," RBC Capital Markets strategist Michael Turner said.
The RBA will hold its monthly board meeting next Tuesday, but at this stage markets see only a slim chance of a cut in the cash rate.
Crucial to the outlook will be Thursday's capital expenditure (capex) data for the December quarter, which will also include the first estimate for investment in 2013/14.
During his appearance in front of federal politicians last Friday, RBA governor Glenn Stevens said the peak in the level of resource sector investment was now "close", but he did not think it would be a rapid decline from this very high peak.
The capex report is one of several quarterly reports due out in the next week that will help shape the December quarter national accounts on March 6, kicking off with construction work on Wednesday.
The RBA is forecasting economic growth of 3.5 per cent for the year ending December, which would need a robust quarterly increase of 1.1 per cent to be achieved.