Week ending 7 November 2008: U.S. stock markets greeted their new president-elect with the largest two-day drop since 1987. Rate-cut fever hit Switzerland (50bps), Denmark (50bps), and Czechoslovakia (75bps) and the LIBOR fell to 2.29% by week’s end in a forex trading market that remained generally rangebound, with currency pairs seeking a new balance in a shrinking global economy.

The RBA cut rates by 75bps to 5.25%. October unemployment held steady at 4.3%, with 34.3K new jobs created, although September ANZ job ads fell −5.9% and September retail sales fell −1.1% m/m. In annual terms, the house price index rose 2.8% in 3Q2008, down significantly from the 8.6% of 2Q2008, while dwelling approvals fell −21.6%. The September trade balance printed a surplus of AU$1460Mn. AUD/USD settled into a range between 0.6600 and 0.7000, closing the week at 0.6761.

The U.S. labour market continues to look grim, with October unemployment jumping to 6.5% from 6.1% previous, with 240K non-farm jobs lost that month and average hourly earnings down −3.6% annually. October ISM printed at 38.9 for manufacturing and 44.4 for services, with the prices paid component falling to 37.0 from 53.5 previous. September factory orders fell −2.5% and mortgage applications fell −20.3% for the week ending 31 October in an admittedly volatile series.

As expected, the ECB cut rates by 50bps to 3.25% and officially declared a recession. Eurozone-wide October PMIs printed at 41.1 for manufacturing and 45.8 for services, with September PPI easing to 7.9% annually from 8.5% previous. September retail sales are down −1.6% y/y. In Germany, factory orders fell −8.0% and industrial production −3.6% in September. On four-hour charts, EUR/USD appears to be consolidating within a pennant drawn from 28 October’s low at 1.2329 and 30 October’s high at 1.3296 with downside-leaning potential.

In a surprisingly strong move, the BoE slashed rates by 150bps to 3.0%. Supporting this move is the NIESR GDP estimate for October, which printed at −0.5%, and September industrial production, down −2.2% annually. HBOS house prices have dropped −13.7% y/y, while October PMIs printed at 41.5 for manufacturing, 35.1 for construction, and 42.4 for services. GBP/USD fell 1.9% on the BoE move, closing the week at 1.5670 on continued high volume, and EUR/GBP rose 2.3% and remains within the upper reaches of its established trading range between support at 0.7700 and resistance at 0.8185, closing the week at 0.8142.

Unemployment in Canada inched higher to 6.2% for October, with 9.5K new jobs added. PMI for October printed at 52.2, down from September’s sunny 61.0 although still above the break-even 50, and September building permits jumped 13.4% m/m. On these numbers, CAD turned in the best performance amongst the 16 most actively traded currencies, with USD/CAD losing 2.5% in the week although AUD/CAD traded roughly flat, opening at 0.8073 and closing at 0.8027.

Unemployment in New Zealand edged to 4.2% while the labour cost index rose 1.1%, both in 3Q2008. The commodity price index for October fell −7.4% m/m. NZD/USD is rangebound between 0.5800 and 0.6100, while AUD/NZD is ditto between 1.1300 and 1.1600.

September leading indicators for Japan remain strong at 89.2. USD/JPY traded flat between 96.00 and 100.00, EUR/JPY remains locked between 123.00 and 130.50, and AUD/JPY, the universal gauge of the carry trade, also traded flat between 64.00 and 70.00.