Safe Haven Flows, But Confined To A Range - The CHF, Yen, and gold rose across the board amid speculation unrest will keep spreading in North Africa and the Middle East, boosting demand for the safest assets. Yesterday in Bahrain, riot police crackdown on protesters killing at three people, while tensions in the Middle East were reinforced by plans, which were later canceled, for two Iranian warships to sail through the Suez Canal. In the UK, the GBP strengthened after Bank of England policy maker Andrew Sentance said the bank should raise interest rates to boost the GBP as a means of curbing inflationary pressures. Sentance has been the loan hawk on the Monetary Policy Committee but his term is up in May and I'm sure they will replace him with a dove. As for Nordic currencies, the NOK and the SEK both weakened against the USD and Euro after each country's central bank looked less likely to increase interest rates after disappointing economic news. In Norway, GDP growth slowed in Q4 while in Sweden it was weaker than expected retail sales and an increase in the unemployed that lowered expectation of faster rate hikes. In the US today, higher than expect jobless claims and consumer price inflation added to pressure on the USD and ticked gold prices higher. In Canada, the CAD continued its upward trajectory on firmer oil price and a positive outlook for global equity markets. The market is waiting to take its cue from Friday’s core inflation data which will shed light on any future Bank of Canada interest rate movement. The central bank makes its next announcement on interest rates on March 1.
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