By Kenny Fisher
The Japanese yen is not showing movement on Friday, as USD/JPY continues to trade in the mid-102 range. In economic news, Japanese Tertiary Industry Activity slipped in March, posting its sharpest decline in almost a year. There are no Japanese or US releases on the Good Friday holiday.
US releases ended the week on a high note, as employment and manufacturing numbers were strong. The all-important Unemployment Claims was up slightly to 304 thousand, but had no trouble beating the estimate of 316 thousand. With the Federal Reserve planning another trim to its QE program at the end of the month and speculation rising about a possible interest rate increase next year, every employment release is under the market microscope. Meanwhile, the Philly Fed Manufacturing Index soared to 16.6 points, its best showing since September. This was well above the estimate of 9.6 points.
Thursday’s Japanese releases
The confrontation in Ukraine, which has upset markets over the past week, is keeping investors on edge heading into the Easter long weekend. Expect forex ranges to be tight, volatility kept to a minimum, and liquidity becoming thinner while watching for any developments on the geopolitical front. Already, the four-party talks (Russia, Ukraine, US, and EU diplomats) on the conflict starting in Geneva today have the US officials admitting that they do not have much confidence of a breakthrough. The delegations are supposedly focusing on a blueprint towards de-escalation. However, in anticipation the US seems to be already preparing for additional sanctions against Russia if the situation remains unchanged.
Yellen spoke and nothing new has the dollar continuing to trade within its current range. The Fed head reiterated yesterday that she expected interest rates to remain very low until the recovery is on a "more secure footing and the American
The US dollar is trading heavier against the euro, sterling and yen, but is somewhat firmer against the dollar-bloc in mostly subdued activity. Full liquidity will not return until next Tuesday.
Sterling is trading at new 4-year highs today. After the strong employment data, more participants are looking for a test on the $1.70 level and above. For its part, the euro has built a base this week near $1.3800 and appears poised to return to last week's high just above $1.3900.
There have been three developments from the Europe to note. First, excess liquidity appears to have risen in the Eurosystem. At 132 bln euros yesterday, it is the highest since mid-March. This may help stabilize EONIA. One of the consequences of this is that the ECB is more likely to be able to sterilize the SMP holdings next week after failing to do so this