A cautious beginning to the forex trading week abruptly changed course on Wednesday, 23 April. Following the success of many major financial institutions in raising capital, reports circulated through the forex and equity trading markets that liquidity had returned to the credit markets, and gains made the previous week consolidated and even extended modestly. The current price tag of credit losses stands near US$290Bn.

An astonishing jump in Australia’s 1Q2008 PPI to 1.9%, lifting the annual number to 4.8% from 2.8%, may force the RBA to again raise rates despite the already noticeable reduction in consumer spending, with the chief culprits not surprisingly being energy and food prices. Strong resistance at 0.9500 continues to contain AUD/USD, with spikes above that level but no sustainable close on H4 charts.

New home sales in the U.S. continue to decline dramatically; however, first-time and continuing unemployment claims fell almost as sharply, giving an increasingly fuzzy outline to the nation’s economic image. Real GDP growth for 1Q2008, to be released Wednesday 30 April, may focus the snapshot more clearly. Also on Wednesday is the next meeting of the FOMC, with the market anticipating a 25bps rate cut and a signal that the Fed intends to wait for further economic data before deciding upon additional moves. The emergency economic stimulus package also goes into effect early next week, intended to boost GDP growth for 2H2008 prior to the national elections in November.

Although ECB officials remain concerned about inflation at 3.5% y/y, more speech time is being given to the downside risks to growth, signalling easing monetary policy to come. The flash CPI for April, to be released Wednesday 30 April, will give insight into the ECB’s future course, with any sustained decline in inflation providing room for rate cuts, although those may be delayed from 2H2008 to 1H2009 if inflation remains high—approximately the same time the FOMC may begin to raise rates.

After EUR/USD traded briefly at 1.6019 on Tuesday 22 April, sliding business confidence indices in Germany, France, the Netherlands, and Belgium undercut the ongoing strength of the Euro, and the currency pair fell to close at 1.5592, a fall of 2.4% in three days. After consolidating for the first of the week, EUR/GBP also fell from lofty heights, in this case as high as 0.8049 on Tuesday 22 April, to close the week at 0.7862.

The housing market in the U.S. is matched only by that in the U.K., with average house prices falling by 2.5% in March 2008, mortgage rates rising despite the BoE’s rate cuts, and the number of mortgage approvals slashed by approximately 50% in one year due to the severe tightening of credit standards. GBP/USD trades in a downsloping channel drawn from 14 March’s mid-term high at 2.0397, although continued consolidation is possible.

The so-called “export drag” continues to weigh on the Canadian economy as declining sales to the U.S. forced the BoC to cut not only the interest rate by 50 bps on Tuesday 22 April, but to follow with a cut forecast of GDP growth to 1.4% from 1.8% in January. This past forex trading week, CAD declined versus 11 of the 16 most actively traded currencies; USD/CAD closed Friday at 1.0160, and AUD/CAD at 0.9468.