Week ending 21 November 2008. Global stock markets have suffered losses of USD16T since the collapse of Lehman Brothers and crude oil fell beneath USD50 per barrel as investors continue to flee risky assets and unwind carry trades. In a week marked by currency consolidation, fear remains the paramount driver, with VIX touching 89, recovering to close at 80 on the appointment of New York Federal Reserve chief Timothy Geithner as Treasury secretary for the new administration.

Despite recent tax cuts, Australia’s 3Q2008 real retail sales rose only 0.1% and new motor vehicle sales fell −0.5% in October, its fourth consecutive decline and down −10.6% annually. The September Westpac-MI leading index fell to 1.0% m/m, well below trend at 3.9%, the sharpest fall since the mid-1980s. AUD/USD trades within a descending price channel of 2.5 weeks duration, best seen on four-hour charts, with RBA intervention clearly visible at channel lows. The support on Friday helped the currency close at 0.6300.

U.S. October CPI printed at 3.7% y/y with core at 2.2%, while PPI fell −2.8% m/m to stand at 5.2% annually from 8.7% previous. The Empire regional manufacturing index set a record low at −25.43 and the Philly fell to −39.3 with all components printing red. Unemployment continues to climb (initial November claims at 542K) and housing starts to plummet (791K from 828K previous). In September, USD143.4Bn entered the country for safe haven, the cause of USD appreciation.

The Eurozone trade balance printed a deficit of −EUR5.6Bn from a year-ago surplus of 13.2Bn. November PMI fell to 36.2 manufacturing, 43.3 services, and 39.7 composite, and German PPI in October fell to 7.8% y/y from 8.3% previous. EUR/USD appears comfortable within its now established range between 1.2400 and 1.2800, closing the week at 1.2577.

CPI in the U.K. fell to 4.5% y/y in October from 5.2% previous with core at 1.9%. October retail sales dropped less than expected at 0.1% m/m and the annual rate rose to 1.9%. With so much bad news already priced into the pound, GBP/USD traded flat for the week, opening at 1.4650 and closing at 1.4866, and EUR/GBP lost 0,.6% to close at 0.8459, still very high.

Canada’s leading indicators fell −0.4% October although September sales rebounded, 1.5% m/m at the wholesale level and 6.4% y/y at retail. October CPI fell to 2.6% y/y and core to 1.7%. USD/CAD lost 2.3% mainly on oil prices, closing at 1.2770 from highs of 1.2982, and AUD/CAD appears to be settling into a range between 0.7850 and 0.8150.

New Zealand 3Q2008 PPI inputs has fallen to 3.7% q/q from 5.6%, and outputs to 2.8% from 3.5%. NZD/USD fell 3.2% to close at 0.5353, while AUD/NZD moved its range a trifle higher to between 1.1600 and 1.1850.

The BoJ left rates unchanged at 0.3% and has few options remaining as Japan officially entered a recession in 3Q2008 with GDP falling −0.1% q/q with −0.9% previous. The leading indicator for September remained steady at 89.4 although exports collapsed −7.7% y/y and the merchandise trade balance fell to −JPY63.9Bn. USD/JPY remains the only currency pair not favouring the former, remaining on a three-week downtrend best seen on four-hour charts and closing at 95.97, while AUD/JPY and EUR/JPY both resumed their downtrends after short flag-shaped consolidations.

The SNB surprised markets with an inter-meeting 100bps rate cut (−50%) even as Swiss September retail sales surged 6.4% from 0% previously. USD/CHF broke above its 2.5-week price channel on Friday, best seen on four-hour charts, closing at 1.2217