With crude oil and other commodities continuing to set historically high prices, international financial and political leaders are exhibiting less patience with U.S. dollar weakness and intervention other than rhetoric becomes increasingly possible.

The RBA left interest rates on hold at 7.25%, as expected; however, the accompanying press release, while noting stronger short-term inflationary pressure, anticipated that the current rate was sufficient to reduce prices over the medium and long terms if demand growth moderated as expected. The jokers in this economic deck include prices of commodity exports and those for petrol and other imports. May retail sales rose 0.7% m/m, much more than market expectations, not a good sign for the RBA’s outlook. AUD/USD traded flat through the week, mainly bouncing beneath strong resistance at 0.9650, while AUD/NZD poked above 1.2700 although without momentum, AUD/CAD again probed the 0.9800 level, and cautious resumption of the carry trade pushed AUD/JPY back above 102.00.

U.S. job losses continue although not at a recessionary pace and the unemployment level remained steady at 5.5%. Consumer spending stimulus via tax rebates as well as strong export numbers are maintaining economic growth at an estimated 2.2% rate in 2Q2008. However the Dow Jones lost 15% value in 1H2008 and house prices have fallen by 25% in certain metropolitan areas, which will maintain financial pressure on consumers after the stimulus checks are depleted.

The ECB raised interest rates by 25bps to 4.25%, as forecast. However, the announcement contained much softer rhetoric than previous ones, clearly stating a lack of bias going forward and giving more weight to the Eurozone’s downside risks to growth and consideration of financial market turmoil. This wiped out forex market expectations for a series of hikes and sent EUR lower against many currencies, including USD, CHF, and AUD. After touching 1.5909 prior to the announcement, EUR/USD fell 200 pips following and ended the week at 1.5698.

The Bank of England meets Thursday 10 July and is universally expected to maintain rates at 5.0% as a balance between weakening growth and inflation well above their target rate. The coming forex trading week is heavy with U.K. economic data, including consumer confidence and industrial production, and broad GBP action is possible. EUR/GBP spiked above 0.8000 prior to the ECB rate announcement, but plunged 100 pips after and ended the week flat. GBP/USD broke below its two-week linear regression channel on Thursday 3 July, and its range has tightened by 50 pips top and bottom to support at 1.9400 and resistance at 2.0000, best seen on daily charts.

The Canadian economy remains roughly balanced, with rising commodities prices countered by continued downside risks to growth. While remaining within the upper half of its established range, +/− three cents of parity, price swings in USD/CAD were volatile this past forex trading week and pressure appears to be building within this pair.

The Tankan survey of Japanese business sentiment dropped to a four-year low, reflecting weakening industrial production and subsequent exports, and hinting at lower GDP growth in 2Q2008 after 4.0% in 1Q2008. On daily charts, USD/JPY has trended higher since its mid-March lows. This week’s bounce off support at 105.00 was also the possible beginning of a retracement off the 61.8% Fibonacci level as measured from 22 May’s low of 102.73 to 16 June’s high at 108.57