Total Data Domination

The Fed repeatedly said its data dependent and trades have evidently taken it to heart as markets have grown extremely sensitive to economic data. It was on display Thursday as the US dollar fell in New York trading after a round of soft numbers. The Japanese services PPI and the all-industry index are due later. The Premium long in EURUSD opened on ECB Day just over 1.0600 is nearing the final target. NZDUSD,  GBPAUD, EURGBP and GBPUSD are the other Premium trades currently in progress.

During many periods, markets ignore the second and third tier US economic data and focus on the general trend but with the Fed undecided on raising rates and the market suddenly less-confident in a US growth pickup, every release is market moving. We can't remember a time – at least since 2007 – when markets were so hung-up on data.

On Thursday it was the combination of new home sales, initial jobless claims and the Markit PMI. All were moderately weaker than expected and combined to send the US dollar into a spiral. Stocks also rallied to a record high and Treasury yields slipped; the combination points to expectations of a more-dovish Fed.

The debate about weather and early-year seasonality rages but from a trading perspective the theme right now has to be to go where the data takes you. Durable goods orders are due on Friday and have been weak for 6 months. The Bloomberg economic surprise index for the US is also at one of the lowest levels since the crisis.

Before that, the focus will be on Japan and the red-hot Nikkei in the next few hours. At 2350 GMT, the Japanese services PPI is expected up 3.3% y/y. Much later, at 0430 GMT, the all-industry activity index is expected to fall 1.0%. BOJ member Nakaso also speaks at 0300 GMT as mixed signals about further QE continue.