Major Trends Die Hard, Japan CPI Next

The US dollar stormed back on Thursday minutes after the euro hit a three week high. The dollar was easily the best performer in US trading but CAD and JPY were tops on the day. Japanese CPI, employment and retail sales are due later. A new set of Premium trades will be issued tomorrow morning ahead of the US GDP revision and Yellen's speech after today's wild-fluctuations day, which looked rather similar to last Thursday in terms of FX swings.

The US dollar rally wasn't driven by a single clear factor but a few elements along with a dose of quarter-end led to a sharp rally.

- Initial jobless claims at 282K compared to 290K exp -  The Markit March services PMI at 58.6 vs 57.0 exp -  The Fed's Lockhart continuing to talk about hikes in June, July or September -  A second consecutive soft Treasury auction

Alone, none of those factors should have given the dollar a big lift but as it got some momentum the dollar gains accelerated. EUR/USD touched as high as 1.1052, narrowly breaking the recent highs, and then tumbling as low as 1.0855.

The dollar made similar gains against the pound and also posted a solid rally against JPY and the commodity currencies in New York trading. The dollar rebound after a few days of declines underscores the power of a long-term trend and the danger in trading against it.

Geopolitics are also a focus with the loonie surging on the back of an oil rally as Saudi warplanes bomb Yemen. The kneejerk higher in crude ebbed later, in part because Middle East countries aside from Yemen are showing rare signs of solidarity and that diminishes the chance of any kind of repeat of an Arab Spring.

The Canadian dollar slid slightly on comments from Poloz. He said first quarter growth will be lower than BOC projections but, importantly, he qualified that by saying the January rate cut has bought time for evaluation – a sign that near-term rate cuts are unlikely.

Up next the focus shifts to Japan with February CPI and jobs data due at 2330 GMT. As Ashraf outlined, the BOJ has moved away from rhetoric suggesting a sagging economy and even though inflation is low, policymakers believe it's transitory. CPI is expected up 2.1% y/y ex-food and energy but even a soft reading may be brushed aside. At 2350 GMT, the focus shifts to retail sales which are expected up 0.9% in February. Signs of better inflation or sales could add to tentative arguments for yen longs.