The close of 1Q2008 saw rising confidence and greater stability in the forex trading market as investors, perhaps punch-drunk from poor economic data in the U.S., took further such in stride. Many currency pairs consolidated, and several ended the week within a few pips of their Monday opening levels. Meanwhile, the price tag for the subprime mortgage crisis currently stands at US$232B, with losses and writedowns forecast to slow in 2Q and 3Q2008.

Australian retail sales declined in February, with January’s figures also revised downward, signalling the end of the RBA’s monetary tightening cycle. Although this week saw some return of the carry trade, with AUD gaining versus the Japanese yen, commodity prices fell further, drawing the currencies of export nations down in tandem. AUD/USD consolidated in a pennant formation for the week and closed Friday at 0.9216, within 50 pips of its prior Monday opening.

Greater-than-expected job losses in the U.S. labour market in January and February centred mainly in construction and manufacturing, a direct extension of the housing correction, and first-time unemployment claims grew sharply. Although this employment downtrend has lasted four months now, a strong indication of a recession, the losses are smaller than are usually seen at the start of an economic contraction and perhaps herald only a modest one. Room remains for additional Fed easing in the months to come; however, it has been their creative measures that have reassured and stabilised the financial markets, and currency strategists have begun buying the dollar against EUR and JPY.

The ECB meets Thursday and no change in Eurozone interest rates is expected with inflation at 3.5%; however, declining growth, estimated by the IMF at 1.3% in 2008 and 1.1% in 2009, looms on the downside of the economic equation and will likely be mentioned by M. Trichet in the press conference following. These falling economic expectations dragged EUR down against most major currencies during the forex trading week. Against pound sterling, EUR set a new high at 0.7981 on Monday then slid for the remainder of the week, turning with a perfect doji on H4 charts to close at 0.7892.

EUR/USD endured choppy trading throughout the week, on Thursday falling around 170 pips before u-turning and regaining its previous level at 1.5680, closing Friday at 1.5730 for a net gain around 0.5% to the dollar.

The BoE also meets on Thursday. While the credit crunch has hit the U.K. more severely than the Eurozone, inflation has also taken hold there with higher energy and food costs, making the BoE’s interest rate decision more problematic and a 25bps cut a possibility. On this possibility, the GBP slid versus 14 of the 16 most actively traded currencies, including USD. GBP/USD turned a former resistance level at 1.9730 into a support level, and has bounced atop it since late February, best seen on daily charts, with bearish pressure building.

Slowing job growth in Canada, declining business and government spending, and increased chances of the BoC lowering interest rates further, dragged CAD down versus 15 of the 16 most actively traded currencies. USD/CAD continues to range trade approximately between 1.0300–0.9700, falling this week from the top of the range to near the centre and closing at 1.0090.