Week ending 12 December 2008, Political brinksmanship in Washington over the proposed automakers’ bailout drove global equities up and down like yo-yos, with risk aversion and currencies the shadows and USD’s status as a safe-haven currency the loser.

Australian workers lost −15.6K jobs in November and the unemployment rate ticked up to 4.4%, while ANZ job advertisements fell −8.6%. NAB business confidence for November fell to −30 while business conditions hit −17 from −11 previous. AUD/USD ticked sharply higher from support at 0.6340, spiking briefly toward 0.6800 before falling to close at 0.6613.

The FOMC meets 16 December and is widely expected to lower rates by 50bps to 0.50%. Retail sales for November fell −1.8%, less than anticipated, as the October trade balance widened slightly to −US$57.2Bn, with the import price index falling −4.4% y/y. November PPI rose 0.4% y/y, 4.2% less food and energy.

The December ZEW survey of economic sentiment in Germany unexpectedly rose to −45.2, still well below trend, while sentiment for the Eurozone fell to −59.0 and the reading for the current situation in Germany collapsed to −64.5, an accurate indication as German industrial production fell −3.9% y/y. October’s German trade balance widened to EU€16.4Bn although the current account narrowed to €15.0Bn, as exports fell −0.5% but imports shrank −3.5%. EUR/USD rose strongly through resistance at 1.3100, respected three times since early November, spiking through 1.3400 to close at 1.3375.

The NIESR November GDP estimate for the U.K. shows a −1.0% contraction. PPI for November printed −3.3% m/m for input and −0.7% output, with core PPI remaining at 5.1% y/y. October’s visible trade balance expanded to −GB£7.75Bn with exports plunging −3.4% despite the pound’s depreciation. For October, industrial production fell by −5.2% y/y and manufacturing by −4.9%. GBP/USD rose 1.7% in the week, closing at 1.4947, while EUR/GBP continues setting new highs, closing at 0.8946.

The Bank of Canada lowered rates by 75bps to 1.5%. October international merchandise trade dropped to CA$3.8Bn from $4.3Bn, itself revised down, and new motor vehicle sales declined −0.9% m/m. USD/CAD rose and fell with crude oil and the automakers’ rescue chances, falling from resistance at 1.3000 to touch 1.2157 and close at 1.2502, while AUD/CAD moved into a higher trading band between 0.8150 and 0.8400, closing at 0.8268.

New Zealand’s 3Q2008 terms of trade contracted −2.3% q/q. October’s retail sales fell −1.3% m/m, while house prices in November fell −6.8% y/y and REINZ house sales are down −45.4% y/y. NZD/USD climbed into the top of its trading band between 0.5200 and 0.5575, closing at 0.5440, while AUD/NZD is riding its MA-200 on daily charts, continuing its uptrend.

The BoJ meets 17 December and is widely expected to leave rates unchanged at 0.3%. 3Q2008 GDP shrank −0.5% q/q and −1.8% annualised, while October’s trade balance contracted to JP¥145.8Bn and the current account total to ¥960.5Bn. The widely-respected Eco Watchers outlook survey from November recorded 24.7 with 50 being the break-even point, and machine tool orders collapsed −62.2% y/y. USD/JPY slid to 88.27, lows not seen since 1995, before recovering on Treasury’s promise to support the automakers and closing at 91.02. EUR/JPY continues tightening within a consolidation triangle on daily charts, closing at 1.2176, and AUD/JPY stabilises between 57.00 and 63.00.