Philly Fires Up Dollar, Crimea Simmers

A solid reading on the Philly Fed survey helped markets forget the threat of rate hikes, while threats in Crimea lose their impact. The solid data continued to underpin the US dollar and it was the top performer while the euro lagged. The Asia-Pacific calendar is quiet as the week winds down. Friday's North America session will be dominated by the twin release of Canadian retail sales and CPI, which will be highly scrutinized after BoC governor Poloz's soft guidance for inflation.

The Philly Fed rose to +9 compared to +3.8 expected and helped the US dollar to the highs of the day despite the employment component at the lowest since June 2013. On the data, EUR/USD broke below 1.3750 briefly and cable hit a one-month low of 1.6480. Both pair later rebounded and US trading ranges were tight overall.

Other economic data included initial jobless claims at 320K versus 325K expected and existing home sales in line with estimates at 4.60M.

The Crimean crisis continues to simmer but traders are having a difficult time envisioning the scenario escalating. The US added 20 names and a small bank to the sanctions list and Russia immediately responded by imposing similar sanctions against high-ranking politicians. In effect, it's all political theatre with the vast bulk, if not all, of the assets out of each other's reach.

It's difficult to see real economic sanctions unless Russia invades Eastern Ukraine and the Russian defense minister reportedly told the Pentagon in a call Thursday that troops will not enter Ukraine. Even headlines of militias seizing Ukrainian ships failed to rattle the market.