This was a week of restructuring financial expectations in the forex trading market, with volatility lowering and confidence rising as both turmoil and surging commodities prices eased. A number of currencies were revalued by the market as inflation concerns beat out growth worries, and forecasts of future rate cuts changed to expectations of rate hikes.

The RBA meets Tuesday 3 June and is widely expected to leave rates on hold. Lowering prices for Australian commodities exports and an anticipated slowing of the economy, possibly into negative numbers, for 1Q2008, give the RBA little room to raise rates further; however, with inflation reading 1.2% q/q during the same period there is no room for cuts. AUD/USD slid slightly, trading between 0.9640 and 0.9500, closing the week at 0.9556. AUD/JPY rose as investors resumed carry trades, closing the week above the psychological 100.00 level.

U.S. economic data continues to surprise to the upside, with 1Q2008 GDP growth revised up to 0.9% from 0.6% and durable goods orders substantially stronger than anticipated, ending thoughts of future Fed rate cuts and increasing CBOT odds of a hike as early as September. Retail sales remain weak but should be helped by the tax rebate scheme, a total of $106.7 billion injected into the economy for the second and third quarters.

The ECB meets Thursday 5 June and is widely expected to leave rates on hold. With German retail sales falling for the second consecutive month in April and economic activity in France trending lower, the ECB remains caught between slowing growth and climbing inflation, measured at 3.6% in May and well above the target band of 2–3%. EUR/USD lost 0.4% this past week, falling below 1.5500 before profit-taking set in to close at 1.5557.

Weakening U.K. consumer confidence, at lows not seen since Thatcher’s ousting in 1990, followed inflation measurements jumping to 3.0% in April and risks remain to the upside despite declines in housing prices. The forex trading market’s anticipation of future BoE rate cuts, previously priced into GBP, reversed course this week and although the BoE is widely expected to leave rates on hold during their meeting on Thursday 5 June, future hikes are now seen as possible before the end of 2008. EUR/GBP also fell during this past week, spiking as low as 0.7832 before closing at 0.7853.

GBP/USD trended very gently lower, remaining below resistance at 1.9845 and above support at 1.9680, with pressure building to the downside.

Although Canadian GDP came in negative for 1Q2008, the figures were skewed by drawdowns on manufacturers’ inventories and lowering exports, particularly to the U.S. Inflation remains low compared to global figures but rose to 1.5% y/y. CAD continues to strengthen due to high commodities prices, rising against 14 of the 16 most actively traded currencies although USD was not one of those; USD/CAD trended gently higher, range-trading between 0.9975 and 0.9815, closing the week at 0.9932.

The RBNZ meets Wednesday 4 June and, like the other central banks meeting this week, is expected to keep rates on hold although anticipation is building for rate cuts later in 2008; however, inflation strengthening in NZ as elsewhere despite the stimulatory budget could defeat such expectations. NZD/USD could not hold gains early in the week and was little changed overall, closing at 0.7833