Week ending 27 February 2009: The forex trading week saw more jittery currencies, with many pairs consolidating as global equity markets sank back to November’s lows. The Japanese yen showed signs of decoupling from its previous safe-haven status, leaving U.S. dollar the last refuge standing.

The RBA meets Monday 2 March and is expected to trim rates by 25–50bps. January imports fell −8.0% m/m although 4Q2008 CAPEX rose 6.0%. The December leading index printed −0.9%, January private sector credit 0.6% m/m and 6.1% y/y. USD/AUD trended gently bullish in a regression channel until Thursday, when it bounced from its MA-200 on four-hour charts and fell through the bottom of the channel; it respected support at 0.6340 and closed at 0.6393.

The second estimate of U.S. 4Q2008 GDP was revised down to −6.2% annualised, much worse than market expectations, with personal consumption down −4.3%. February Chicago PMI eased upward to 34.2; however, the Richmond manufacturing index fell to −51 and Dallas to −57.3 while consumer confidence hit 25 from 37.4 previous. January existing home sales dropped −5.3% m/m, new homes −10.2%, and durable goods −5.2%.

The ECB meets Thursday 5 March and is widely expected to cut rates by 50bps; growth and inflation projections will be released simultaneously, illustrating the governing council’s expectations regarding future monetary policy. January Eurozone CPI slipped to 1.1% y/y, 1.6% core, while unemployment rose to 8.2%. December’s current account deficit shrank to €7.3Bn from €13.9Bn previous. German Ifo for February dropped to 82.6 business climate, 84.3 current assessment, and 80.9 expectations. EUR/USD remains choppy, trending down in waves from previous Friday’s USD sell-off to close at 1.2676.

The BoE meets Thursday 5 March and is widely expected to cut rates by 50bps and also to discuss the initiation of quantitative easing. 4Q2008 GDP contracted −1.5% q/q, −1.9% y/y, with private consumption falling −0.7%. GBP/USD consolidated between 1.4660 and 1.4140, while EUR/GBP chopped and changed between bears and bulls only to trade flat for the week, closing at 0.8852.

The BoC meets Tuesday 3 March and is expected to cut rates by 25–50bps. December retail sales fell −5.4% m/m, greater than market expectation, and 4Q2008 current account BoP fell to a deficit of CA$7.5Bn, the first in almost a decade. USD/CAD climbed into the upper reaches of its current range, closing at 1.2721, while AUD/CAD remained within its central zone, closing at 0.8133.

The RBNZ released a two-year inflation expectation of 2.3% for 1Q2009. February business confidence slid to −41.2 and January trade balance printed a deficit of NZ$187.0M. NZD/USD sank into the bottom of its 200-pip range, closing at 0.5006, while AUD/NZD climbed steadily to a new February high of 1.2803, closing not far below at 1.2760.

January household spending in Japan fell −5.9% with CPI flat. The merchandise trade deficit widened to ¥952.6Bn, with industrial production down −30.8% y/y, vehicle production −41.0%, and construction orders −38.3%, although unemployment eased to 4.1%. With traders losing their yen for yen, USD/JPY blasted through major resistance at 95.00 to 98.70 before closing at 97.58. EUR/JPY shot through long-respected 119.80 to bounce from 125.80, closing at 123.70, while AUD/JPY trailed along, respecting resistance at 64.75 and closing at 62.38.