In a light data week, the first intimation from the FOMC regarding withdrawing liquidity supplies from financial markets caused resurgent risk aversion and some USD strength. Commodities and equities weakened, taking the commodity dollars with them, but still not beyond current ranges.

Australia’s August new home sales surged 11.4% m/m but September DEWR skilled vacancies rose a more tepid 1.2%. AUD/USD consolidated between roughly 0.8600 and 0.8800, but with possible potential bullish pressure building.

As expected, the U.S. FOMC left rates unchanged at 0.0–0.25%. However, the committee extended the duration of certain QE measures to create a trickle-down exit. On Thursday, the Federal Reserve reduced the amount of USD available to banks for short-term loans, signalling a reduction in their liquidity life support. August durable goods orders shrank −2.5% m/m, flat ex-transportation, August existing home sales contracted −2.7%, but August new home sales rose a tepid 0.7%, and initial jobless claims for the week ending 19 September improved slightly (although those for the previous week were revised worse).

Eurozone September PMIs printed 49.0 manufacturing, 50.6 services, and 50.8 composite, as the German September Ifo printed 95.7 expectations, 91.3 business climate, and 87.0 current assessment. All are improvements but not to market expectations. July industrial new orders rose 2.6% m/m, −24.3 y/y, and M3 growth slowed to 2.5% y/y. EUR/USD consolidated between 1.4610 and 1.4825, EUR/AUD between 1.6860 and 1.7025.

In the U.K., August mortgage lending improved to early 2008 levels and September Rightmove housing prices have recovered to −1.5% y/y (previous −3.1%). However, comments from BoE Governor King suggested a weaker pound would not be viewed with disdain, and the forex trading market obliged, with GBP/USD losing 2.0% to close at 1.5928, its lowest level since early June, while EUR/GBP climbed 1.7% to close at 0.9206, its highest level since early April.

Canada’s July retail sales sank −0.6% m/m, −0.8% ex-autos. USD/CAD traded with the price of crude oil, rising 2.2% in the week to close at 1.0914. AUD/CAD resumed its upward trend with gusto, slamming through resistance at 0.9365 and touching 0.9488 before closing at 0.9437.

New Zealand broke five consecutive quarters of recession with a 2Q2009 GDP print of 0.1% q/q, −2.1% y/y. August PMI services advanced to 51.3, August credit card spending rose 0.1% y/y, 3Q2009 Westpac consumer confidence shot to 120.3 from 106.0, and 2Q2009 current account balance printed a surplus of NZ$124Mn, the first in more than six years. However, the August trade balance printed its largest deficit in a year at NZ$725Mn. NZD/USD rallied to 0.7311, its highest level since late July 2008, before easing back on general risk aversion and rumours of RBNZ selling, to close at 0.7167. AUD/NZD dropped beneath previous week’s support, closing at 1.2057.

Japan’s August merchandise trade balance printed ¥185.7Bn, ¥235.4Bn adjusted, with exports down −36.0% y/y, imports −41.3%. September corporate yen repatriations made the yen the best-performing currency this forex trading week, driving USD/JPY below 90.00 to close at 89.84. EUR/JPY lost its gains from the previous week, closing at 131.78. AUD/JPY could not hold gains above 79.60 and fell with the general yen strength, closing at 77.70.