There appears to be no news at all today, but something is happening in the markets: USD/JPY appears to have taken a pause. I wonder whether the market rally — which may well be driven by Japanese investors — is likely to take a pause. On the other hand, it might all be down to political noise around the G20. Given the strength of the Japanese force, I am inclined to wait for the rally in USD/JPY to end decisively before shorting US equities.

Senate Democrats have come up with a “plan” to replace the sequester with a package of spending cuts and a tax increase based on the Buffett rule. Mr. McConnell has already call this a political stunt, and indeed it is, because the Republicans are highly unlikely to accept any tax increases. But it is also a political manoeuvre: the Democrats want both to keep open a discussion about the sequester, in case the Republicans prove willing to talk, and, if the sequester cuts take effect, to place blame on the Republicans for the resultant economic weakness. In order to do that, they need to keep the issue alive, and they need to oppose the cuts.

The problem with the sequester is that it actually could happen. Republicans, as I said earlier in the week, might allow it, and Democrats might calculate that they can put the blame for it (rightly) on the Republicans and thereby benefit in the polls.

At Econbrowser ( there is an analysis of the Brent-WTI spread. This spread has not closed as many market participants, including some non-specialists, had expected. There were several articles at the start of the year about how the full reversal of the Seaway pipeline in January would cause the spread to narrow by the end of 2013, but it turns out that it just wasn’t that simple.

I have had a quick catch-up on the employment situation in the US, improvement in which is the Fed’s stated criterion for the end of asset purchases. My composite index for the current situation has been flat for several months: unemployment is up and the employment/population ratio is down, and non-farm payrolls have been roughly flat. The only positive is initial jobless claims. I also have a version of the index that includes economic expectations, as expressed in a survey of forecasters, and that index has ticked up in the past couple of months (it is the employment outlook that the Fed has actually said is important, which I conceive as an amalgam of the current situation and expectations for economic growth). However, I suspect that there would have to be some improvement in the current-situation components as well as the outlook before the Fed would end its purchases.