Week ending 6 March 2009, A horrible week for U.S. equities, with the Dow Jones breaching first 7,000 then 6,500, left currencies consolidating between risk aversion and any hint of hope shell-shocked investors could find. The weight of poor U.S. fundamental data finally shifted its stance as the last safe-haven currency, sending the Swiss franc and Japanese yen sharply higher.

The RBA surprised markets, leaving rates unchanged at 3.25%; however, 4Q2008 GDP printed −0.5% q/q, 0.3% y/y, sponsoring uncertainty regarding the wisdom of that decision. January retail sales held at 0.2% m/m, while the 4Q2008 current account balance printed a deficit of AU$6499M and January trade balance a surplus of $970M. February performance indices fell further, to 31.7 manufacturing, 32.2 services, and 29.5 construction. AUD/USD dropped to a lower level at Monday’s start of trading, then trended higher only to bounce from the MA-200 on four-hour charts, closing the week roughly flat at 0.6402:

The U.S. lost 651K jobs in February, bringing the sum total since December 2007 to 4.2M;the unemployment rate surged to 8.1%. 4Q2008 unit labor costs ballooned 5.7%, pointing to additional future job losses, as mortgage delinquencies hit 7.88%, the highest since at least 1972. February ISM manufacturing held at 35.8, services 41.6, and January pending home sales fell another −7.7%.

As expected, the ECB cut rates 50bps to 1.5% after the second estimate of 4Q2008 GDP was revised down to −1.3% y/y. In the press conference, M. Trichet was not encouraging, slashing growth projections and opening the door for further rate cuts as well as non-standard measures. February CPI rose to 1.2% y/y as PMIs printed 33.5 manufacturing, 39.2 services, and 36.2 composite. EUR/USD fell beneath strong support at 1.2560 but rallied repeatedly, surging Friday to resistance at 1.2725 prior to the release of U.S. jobs data and closing at 1.2638.

The BoE also cut rates 50bps to 0.5% and initiated quantitative easing. February PMIs printed 34.7 manufacturing, 27.8 construction, and 43.2 services, while consumer confidence eased up to 43 and PPI registered 0.5% y/y input, 3.1% output, and 3.7% output core. GBP/USD slid into a lower level of its range, between 1.3975 and 1.4300, while EUR/GBP trended lower then blasted higher twice, best seen on four-hour charts, consolidating just beneath 0.9000 to close at 0.8979.

The BoC cut rates 50bps to 0.50% after 4Q2008 GDP printed −3.4% annualised; however, February Ivey PMI rose to 45.8 from 36.1 previous. USD/CAD held above 1.2725 but beneath the magical 1.3000, and AUD/CAD leapt sharply higher but could not hold gains above 0.8300, closing at 0.8237.

The RBNZ meets Thursday, 12 March, and market expectations range from 50–100bps cut from the current 3.5%. The February commodity price index fell −4.6%. NZD/USD dropped beneath the psychologically important 0.5000 level at the start of Monday’s trading but recovered midweek, closing at 0.5015, while AUD/NZD surged as high as 1.2929 before falling to close at 1.2750.

Japanese capital spending in 4Q2008 fell −17.3%, −18.1% ex software, and February vehicle sales dropped −32.4% y/y. USD/JPY could not break 100.00, closing at 98.26, EUR/JPY continues consolidating within its new higher range between 122.00 and 125.80, and AUD/JPY managed a midweek rally before falling to close at 62.91.