The third attempt was the charm: EUR/USD breached the psychological 1.50 barrier, breaking free from the 1.43–1.49 range in which it had been trapped since November 2007 and touching 1.5239 before closing at 1.5179. Several other currency pairs reached record levels during this forex trading week, including NZD/USD at 0.8213 and EUR/GBP at 0.7677, while certain commodities, particularly gold and oil, also traded at record levels. Writedowns at major international banks have topped US$160bn to date and more are expected.

The RBC meeting on Tuesday is widely expected to produce a 25bps rate hike in an attempt to battle the increasingly serious inflation problem, spurred by a ferociously tight labour market, escalating food and energy costs, and strong consumer spending. The anticipation of 7.25% made AUD the best performing of the 16 major global currencies this past forex trading week. AUD/USD gained 5.4% in February and reached 0.9496, and it remains within a significant uptrend perhaps best appreciated in monthly charts.

The short-term relief of the monoliners, through various schemes designed to prevent en masse downgrades of their credit ratings, was almost lost among weaker-than-forecast U.S. data and pessimistic commentaries from Fed Chairman Bernanke and Vice Chairman Kohn. The latter’s suggestion on Tuesday 26 February, that the economic stabilisation predicted for 2H08 may be pushed into the longer term, sparked off the rally that pushed EUR/USD to its new high, as well as dropping USD/CHF and USD/JPY, the traditional safe-haven currencies, to new lows.

Although growth forecasts for the Eurozone have been reduced, the inflation forecast has been raised, and therefore a change in interest rates is not expected from the ECB’s Thursday meeting. This may come complete with the usual anti-inflation rhetoric from M. Trichet, which would tend to support EUR/USD; however, any suggestion of central bank intervention, whether posturing or factual, could signal at least an intermission for the rally.

The EUR/USD climb above 1.50 has been a strong one with few profit-taking pullbacks, so forex traders caught flat-footed by the sudden push have had little opportunity to enter the market and each new high has signalled the onslaught of additional buying. Although a consolidation can be expected in the 1.52–1.53 area, with 1.50 becoming the new support level, the upside target is 1.55, and only a break below 1.4890 may signal the end of this rally.

Declining real estate prices in the U.K. led to speculation the BoE will cut interest rates faster and sooner than the ECB, spurring sterling weakness against the Euro to a new record level. GBP/USD, on the other hand, remains little changed, trading within a range between 1.9375 and 1.9950. The BoE announcement is scheduled for Thursday, with opinion divided between no change and a possible 25bps cut.

BoC also meets this coming week, with the expectation of a 25bps or 50bps rate cut on Tuesday 4 March balancing record commodity prices to keep CAD/USD within its established trading range of 1.0300 and 0.9700, entered late November 2007.

The BoJ meets Friday, however, no rate change is expected amidst the poor Japanese economic climate. The yen will continue to trade, not on economic data, but on risk aversion and the prospects of the carry trade.