EUR/USD is trading quietly on Friday, as the pair remains in the mid-1.38 range in the European session. On Thursday, US Unemployment Claims and the Philly Fed Manufacturing Index looked sharp, as both surpassed expectations. We can expect thin trading on Good Friday, with no releases out of the Eurozone or the US.
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.
Comments by Federal Reserve chair Janet Yellen on Wednesday continue to weigh on the US dollar. Yellen said there is little inflationary pressure on the economy, and it was unlikely that the Fed's inflation target of 2% would be met. She added that although the economy has showed signs of recovery, unemployment remains a sore spot. The Fed has abandoned its promise to maintain interest rates at least as long as the unemployment rate is above 6.5%, but the dovish stance we are seeing from Yellen means that a rate hike is unlikely in the near future.
The crisis in the Ukraine continues to simmer, as Russian President Vladimir Putin threatened to act his "right" to attack Ukraine. There have been several skirmishes between pro-Russian militiamen and Ukrainian forces, and casualties have been reported on both sides. Secretary of State John Kerry and his Russian counterpart met on Thursday, but a quick resolution is unlikely. Western Europe is dependent on Russian oil and gas, so we can expect the markets to react if the crisis intensifies.
EUR/USD 1.3817 H: 1.3822 L: 1.3808
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