The new year began with a sell-off of global stock markets, entrenching risk aversion, and a new record high on the price of gold. The united central banks’ liquidity measures returned some sensation of normalcy to the money and credit markets, however, the forex trading market remained jittery at best.

Numbers for the Australian economy remain strong, including jobs market, retail sales, and housing starts. Even the trade deficit narrowed in November, leading to the possibility of another RBA interest rate hike later in 2008. This past week, the widening spread strengthened AUD 2.5% against its U.S. counterpart; the trend remains up despite a consolidation at Friday’s close reflecting profit-taking. AUD/JPY, meanwhile, entered a channel between 94.45 and 100.16 in mid-November and remains there, despite spiking below during the height of risk aversion.

Continued fears of a U.S. recession dragging the global marketplace behind it were fed by a scarcity of data. What data was available was mainly bad, with more writedowns at major financial institutions, the number of pending home sales falling, and a widening trade deficit. FOMC Chairman Bernanke’s speech on Thursday emphasizing that “substantive additional action” could be necessary to stave off recession sent odds of a 50bps rather than 25bps rate cut on 30 January soaring to 88% and set the forex trading market on a new USD bear move.

Eurozone inflation rose over the 3% comfort mark in December with disappointing November retail sales and weakening industrial production in both France and Germany. Despite M. Trichet’s strong rhetoric on combating inflation, the ECB left interest rates on hold, although as the economic slowdown strengthens a rate cut is only a matter of time. EUR/USD rose strongly on Thursday after Bernanke’s speech and the ECB announcement, then consolidated Friday between 1.4761 and 1.4819.

The Bank of England’s MPC also left interest rates on hold after trimming 25bps in December, but again, with the slowdown biting more clearly in the U.K., additional cuts are coming sooner or later. In the case of GBP, the market is already pricing these anticipated cuts into the currency’s crosses, and sterling fell against most of the majors, in particular setting new lifetime lows against EUR. GBP/USD is trending down as well, with currently no bottom in sight.

The Canadian dollar fell against all of the majors as signs of the U.S. slowdown extending north became clearer through unexpected job loss and weaker housing data. Friday’s spike of USD/CAD was 164 pips, however, the cross could not overcome 1.0220 despite multiple attempts.

Despite the threat of rising domestic inflation, New Zealand’s dollar was among the best performers on the forex trading market, climbing 148 pips on Thursday alone to close Friday at 0.7826.

The Japanese yen rose against 14 of the 16 most actively traded currencies, mainly through risk aversion as investors continued paring carry trades. Friday found USD/JPY testing lows near 108.61 as it consolidated following a dramatic drop from Wednesday’s 110.12.

The Swiss franc as a safe-haven currency retested psychological lows against USD and gained significantly against EUR and GBP. Even UBS AG, Europe’s largest bank by assets, seems to have been hit by the subprime mortgage crisis, posting a letter on its website encouraging shareholders to support a fund-raising effort.