The most recent wave of financial turmoil subsided this past forex trading week, leaving investors wary and looking for the next round while many currency pairs consolidated. Measures enacted by the U.S. Federal Reserve and other central banks seem to be stabilising financial markets, although Goldman Sachs forecast eventual losses of US$460Bn from the subprime mortgage collapse.

Australian inflation is widely expected to read 4% when CPI data is next released, splitting pundits’ votes as to the possibility of an interest rate hike during the RBA meeting on Tuesday, 1 April. Commodity prices recovered this past forex trading week, and AUD rose against 12 of the 16 most actively traded currencies. The double top on AUD/USD stalled out at 0.8952 and rebounded from that point back to the 0.9250 area, closing Friday at 0.9174.

Although it’s far too early to speak of a housing market recovery in the U.S., there are signs that the downward correction is possibly stabilising. While single-family home average values dropped 10.7% y/y in January, existing home sales actually rose, while new home sales fell less than expected and inventories of unsold houses on the market have continued to fall. Coupled with slightly rising personal income, unchanged real spending, and inflation remaining within the Fed’s target range, the outlook for the U.S. economy is not uniformly bleak, and although there is room for additional monetary easing should it be deemed necessary, economic fundamentals now provide a floor beneath future interest rate cuts despite the gloomy ISM indices to be released this coming week.

Although the Ifo index surprised (again) to the upside, PMI data as a more accurate indicator of German GDP has slowed to trend growth. Eurozone manufacturing figures show increased production but fewer new orders, and the “flash” CPI, to be released Monday 31 March, is widely expected to show inflation at 3.3%. Although the Euro gained 8.3% against USD in 1Q2008, the stochastic is above 80 on the daily chart, and the consolidation that EUR/USD entered on Thursday, 27 March, visible as a series of doji and spinning tops on the H4 chart, may continue.

Although home values in the U.K. rose 1.1% y/y in March, consumer confidence declined to 15-year lows, and while real GDP remains a positive figure, BoE Governor King has signalled a possible interest rate cut at the next meeting on 10 April. The EUR/GBP fell to a new record low of 0.7929 on Friday, 28 March, a fall of 7% in 1Q2008. GBP/USD continued its rollercoaster between 1.9400–2.0400, best seen on daily chart but quite dramatic on H4, closing the week below the psychological 2.00 point at 1.9937.

The recovery in commodity prices supported the Canadian dollar against USD. After its dramatic rise the previous forex trading week, USD/CAD fell slightly then consolidated within its established range, three cents above and below parity, closing Friday at 1.0212.

New Zealand’s GDP surprised to the upside at 1% in 4Q2007, with exports from agriculture (specifically dairy) and oil, from the offshore Tui field, contributing strongly. NZD/USD rose sharply in the first half of the forex trading week then consolidated prior to an equally sharp fall on Friday, to close at 0.7963.