Uneventful Trading Except For Sterling & An Ominous Sign - The GBP strengthened to 1.64 level for the first time since January 2010 as U.K. inflation accelerated more than economists forecast, renewing speculation that the Bank of England will raise interest rates. The Office for National Statistics reported that consumer inflation rose at a 4.4% annual pace in February, up from 4% in January and more than double the Bank of England’s 2% target. Interest-rate expectations had come off last month but today's data has pulled forward rate hike expectations as early as May. Elsewhere, the rest of the major currencies all traded within a tight band and were little changed. Now a few thoughts on the ominous sign in USD index - since the beginning of the year we have experienced multiple black swans (flooding and cyclones in Australia, political turmoil in North Africa and the Middle East, New Zealand earthquake, and Japan's earthquake, tsunami, and nuclear disaster) but yet the USD index has kept falling. The USD index has fallen through the November 2010 low and is now on a trajectory to hit the low of 2008 in the next couple of months. I'm bringing this up because what has happen to the notion that the USD as a safe haven? I guess the debasing of the USD through multiple QE and the out of control government spending by the US is taking its toll. The next couple of months should see all commodities rally even more in the face of a falling USD. In Canada, the CAD came off its meager gains after a disappointing retail sales report and on slightly lower oil prices. Retail sales unexpectedly fell 0.3% in January, the second monthly decline. This data validates the Bank of Canada's decision to remain on hold.
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