Jobless Claims Fall, Busy Data Slate From Japan

US economic data continued to solidify with an upbeat initial jobless claims report but the real test will come next week. The New Zealand dollar was the top performer on Thursday while the euro lagged. A major data slate is due from Japan including the jobs report, CPI and retail sales.  

Jobless claims fell to the lowest since November at 311K compared to 325K. The final revisions on Q4 GDP missed expectations at 2.6% compared to 2.7% but consumer spending and trade were upbeat and that's a positive sign for 2014.

The euro slumped to a three-week low at 1.3728 as the market weighs the chance of a surprise ECB move at the upcoming meeting. The Fed's Bullard also called for a rate hike in Q1 2014, giving the US dollar a boost. Another factor was EUR/GBP selling following the strong UK retail sales report.

Cable has stormed back with four days of gains following five consecutive days of losses. With the Fed beginning to talk about rate hikes and the UK economy showing far healthier signs, including quickly rising house prices, the focus could easily shift to the BOE.

The stars all week have been the commodity currencies. The loonie rose for the fifth day in a row, the Aussie hit a four-month high and the kiwi took out last year's best level and rose to the highest since 2011.

There wasn't a particular driving force in the market but the London fix was particularly active for the fourth day in a row. That could be a sign of elevated flows, possibly due to Japanese fiscal year end.

The focus will remain on Japan in the hours ahead with all the top-tier data on the schedule. At 2330 GMT, Japan releases employment and inflation data. The main headline to watch is Feb national CPI, which is expected at 1.5% y/y compared to 1.4% in January. At 2350 GMT, the retail sales report for Feb is due and expected to rise a healthy 3.5% m/m as spending is pushed forward ahead of the April sales tax hike.