Week ending 14 November 2008: As credit markets continue thawing, stimulus packages are unveiled around the world. Leaders from the G20 nations meet this weekend to discuss increasing transparency and stability in global financial markets.

The November Westpac-MI consumer sentiment index rose to 85.5 although economic pessimists still outnumber optimists by 14.5 index points. September housing finance fell by −2.7% although mostly in refinancing. AUD/USD tested 0.6350 and AUD/JPY 0.6050, but both rebounded as RBA purchased the currency, with other crosses also responding to the support; nevertheless, AUD lost 2.8% versus USD and 3.9% versus JPY for the week.

In a holiday shortened week, U.S. retail sales fell by −2.8% in October, led by a −12.7% collapse in petrol store sales. The 3Q2008 trade balance narrowed further with both imports and exports declining by record amounts, the final print at USD56.5Bn. Mortgage applications for week ending 7 November rose 11.9% and first-time claims for unemployment benefits rose to 516K.

The Eurozone’s 3Q2008 GDP, as expected, printed negative at −0.2%, thus entering a technical recession, with annual growth falling to 0.7%. CPI for October remains elevated at 3.2% y/y with the core at 1.9%. Industrial production fell −1.6% in September, down 2.4% annually, and the Euro-wide ZEW sentiment remains low at −54, −62.7 previous. EUR/USD traded down for most of the week but recovered on Thursday with a buying spree amongst U.S. energy stocks, ending the week at 1.2686.

U.K. inflation remained high in October, with producer input prices up 13.8% y/y, output at 6.8%, and output core at 4.9%; all are down from their peaks, with inputs in September printing at 24%. The September trade balance narrowed to −£3.863Bn, beating expectations, and while October jobless claims held steady, the September unemployment rate edged up to 5.8%. GBP/USD lost 1000 pips for the week, closing at 1.4794, while EUR/GBP broke decisively above its established price channel, rising 5.3% to trade near historic highs between 0.8530 and 0.8630 although spiking as high as 0.8662.

Canada’s September international merchandise trade lowered to CAD4.5Bn although manufacturing shipments posted a 0.1% rise. The housing market remains stable, with prices flat and starts holding steady. USD/CAD fell with the price of crude oil, down 18% for the year to date and closing at 1.2249, while AUD/CAD trades within a regression channel of two weeks’ duration, best seen on four-hour charts, with a slight downward trend.

New Zealand 3Q2008 retail sales contracted −0.9% although those for September were roughly flat. NZD/USD broke beneath support at 0.5800 and traded down to close at 0.5574, while AUD/NZD broke above resistance at 1.1600, found new resistance at 1.1800, and closed at 1.1716.

Japanese machine tool orders in October are down −40.4% y/y and industrial production for September was only 0.2% m/m. The September trade balance printed at ¥247.1Bn, beating market expectations, and the adjusted current account total also rose, to ¥970.5Bn. October’s domestic corporate goods price index printed at 4.8% y/y, down from 6.8% previous, and the Eco Watchers survey registered 25.2 for outlook and 22.6 for current, both down from September. JPY remains bid on repat flows, with USD/JPY remaining beneath 100 for the week, while EUR/JPY spiked as low as 117.65 before closing at 123.18 for a marvelously volatile week.