Forex Trading Week ending 8 May 2009: Global equities markets continue to rally on nil, as most economic data indicate not a stabilisation but a less dramatic contraction with numerous downside risks remaining. Commodity and higher-yielding currencies gained as safe-havens declined in a widespread shifting of ranges.

The RBA held rates steady at 3.0% but lowered 2009 GDP projections to −1.0%. March retail sales rose 2.2% m/m, March trade balance expanded to a surplus of AU$2498M, April employment added 27.3K jobs, and April unemployment retreated to 5.4%. April PMIs improved to 39.8 services and 36.5 construction, while April ANZ job advertisements fell −7.5% and 1Q2009 housing price index dropped −6.7% y/y. AUD/USD was one-way all week, rising 5.2% and closing just beneath resistance at 0.7678.

U.S. banking stress tests indicated that fewer than half of the major banks are sufficiently capitalised to withstand a more severe economic downturn. April employment lost “only” 539K jobs although the prior two months were revised sharply higher and the unemployment rate rose to 8.9%. March consumer credit contracted US$11.1Bn while March pending home sales rose 3.2% m/m, and April PMI services improved to 43.7.

The ECB cut rates by 25bps to 1.0%, as expected, and announced a covered bond purchase programme of €60Bn. April PMIs printed 36.8 manufacturing, 43.8 services, and 41.1 composite, and May Sentix investor confidence improved to −34.3. March PPI fell −0.7% m/m, −3.1% y/y, while retail sales contracted −0.6% m/m, −4.2% y/y. EUR/USD rose into a higher range, breaking above the MA-200 on daily charts and closing at 1.3627.

The BoE left rates steady at 0.50%, as expected, but raised QE spending by £50Bn to £125Bn. April PMIs printed 38.1 construction, 48.7 services, and Nationwide consumer confidence improved to 50. April PPI printed input −1.0% m/m, −5.0% y/y, output 0.6% m/m, 1.2% y/y, and output core 0.4%, 2.4% y/y, while HBOS housing prices fell −17.7% q/y. EUR/GBP broke briefly beneath support at 0.8790 but rallied through the week to close at 0.8941, while GBP/USD broke easily through psychological resistance at 1.5000, rising to close at 1.5234.

Canada’s April unemployment rate held steady at 8.0% as 35.9K job seekers opted for self-employment and the April Ivey PMI rocketed to 53.7, handily passing the 50.0 break-even level. USD/CAD fell through multiple support levels to close at 1.1491, last visited in early November 2008, while AUD/CAD rose strongly into the higher part of its range, closing at 0.8823.

New Zealand’s unemployment rate rose to 5.0%, beating market expectations of 5.3%, and April ANZ commodity prices rose 2.5%. NZD/USD sliced through multiple resistance levels, climbing 6.0% on improved commodities and closing at 0.6026. AUD/NZD consolidated within the upper reaches of its range, closing at 1.2732.

In a light data session dominated by the Golden Week holiday, Japan’s monetary base increased 8.2% y/y. USD/JPY consolidated between 98.00 and 99.60. EUR/JPY pushed off from support at 130.60, climbing to close at 134.14, while AUD/JPY, the barometer of risk aversion, held its position above the MA-200 on daily charts most of the week, climbed for an eighth consecutive forex trading day for a 4.5% gain and closing at 75.58.