Week ending 20 March 2009: As expected, the FOMC left rates unchanged at 0.0–0.25%; however, it flipped on the printing press and aggressively leveraged quantitative easing (QE), sharply weakening USD. Commodities gained, equities dithered, borrowing costs and U.S. investment returns fell, and the VIX risk-aversion measure rose anew beyond 45, while USD/CHF lost all its SNB-contrived gains of the previous week plus a bit more.

Australia’s January Westpac leading index dropped −0.2% m/m, 4Q2008 dwelling starts −9.9% q/q, and February new vehicle sales −3.5% m/m and −18.6% y/y. The 1Q2009 Westpac-ACCI composite index dropped to 34.0, well below the 50 break-even level. AUD/USD rose 4.2% from opening at 0.6548; however, it remained below the psychologically important 0.7000 level, turning at 0.6942 and closing at 0.6857.

U.S. February CPI printed 0.4% m/m, 0.2% y/y, with core ex-food and energy 0.2% and 1.8%, while February PPI registered 0.1% m/m, −1.3% y/y, with core 0.2% and 4.0%. The March Empire manufacturing survey fell further to −38.23, the Philadelphia Fed improved to −35.0, and February industrial production dropped another −1.4%. However, February housing starts surprised with a surge to 583K.

Eurozone February CPI printed 0.4% m/m, 1.2% y/y, 1.7% y/y core. Employment growth in 4Q2008 slid −0.3% q/q and printed flat y/y. January industrial production is down −3.5% m/m, −17.3% y/y. Although the March ZEW survey for economic sentiment improved in Germany (−3.5 from −5.8) and the Eurozone (−6.5 from −8.7), the current situation reading fell further to −89.4. EUR/USD rose 4.7%, surging from 1.2884 to a weekly high of 1.3738, closing on position squaring and renewed caution at 1.3566.

Released BoE minutes indicate the last rate cut and initiation of QE was a unanimous decision. The U.K. jobless claimant count rose by 138.4K, significantly above market expectations, and the unemployment rate reached 6.5%. March CBI industrial trends fell to −48%, the weakest level since 1980. EUR/GBP rose on the shocking unemployment figures but couldn’t quite reach late January’s level, stopping and turning at 0.9496, closing at 0.9392. GBP/USD broke above its trendline and closed at 1.4440, remaining bound by resistance at 1.4550, best seen on daily charts (below):

Canada’s February CPI printed 1.4% y/y and core 1.9% y/y. January retail sales rose 1.9% m/m, 1.3% less autos, and auto sales rose 5.5%, while January wholesale sales fell −2.4% m/m and manufacturing shipments −5.4%. USD/CAD fell 2.6% as oil broke above US$50/bbl after the FOMC action, closing at 1.2392, while AUD/CAD rose strongly to 0.8498, just beneath long-term resistance at 0.8600.

New Zealand’s 4Q2008 manufacturing activity printed flat. February credit card spending was down −1.9% y/y; however, the same-month services index improved to 46.3. USD/NZD followed the general greenback-depreciation path, surging 6% to close at 0.5578, while AUD/NZD also sustained the break beneath its long-term trendline, best seen on daily charts, closing at 1.2280 in perhaps a new down-trend.

As expected, the BoJ left rates unchanged at 0.10% and ramped up QE operations, ignored in the market frenzy over the Fed’s actions. The January tertiary industry index improved 0.4% m/m; however, February machine tool orders are down −84.4% y/y. USD/JPY fell 2.1% before rebounding on renewed caution, closing at 95.88. EUR/JPY continued its strong climb, closing at 130.06, while AUD/JPY climbed to 65.75