Dollar reverses earlier gain today and spikes lower on news that Israel said two Iranian warships planned to sail through Suez Canal en route to Syria. Israeli hinted a response and Foreign Minister Lieberman said Israel can't ignore forever these kinds of provocations. However, Suez Canal Authority said that no Iranian warships have passed through the canal today. Gold and crude oil jumped after the news on worry of security threat for Israel. Dollar, on the other hand, was sold off sharply from today's high. Meanwhile, Swiss Franc, an alternative safe haven currency to dollar, jumped. Today's move hold dollar index below key near term resistance of 78.789 and it looks like the greenback will remain soft for a while until markets fully digest the news.
FOMC minutes released today noted that members are generally more confidence that economic recovery would be sustained. Nevertheless, the board is still unsatisfied with the pace of and the unevenness of the improvements in labor markets. Growth projection for 2011 was raised from 3-3.6% to 3.4-3.9%. Unemployment rate was forecast to be at 8.8-9.0% in Q4, slightly lower than prior estimate of 8.9-9.1%. Inflation is projected to be at 1.3-1.7%, inline with prior projection.
Data from US saw housing starts jumped 15% to 596k annualized rate in January. Building permits, though dropped 10% to 562k annualized rate. PPI in US rose 0.8% mom, 3.6% yoy in January, with core PPI up 0.5% mom, 1.6% yoy, both above consensus. Industrial projection unexpectedly dropped -0.1% in January. Canadian international securities transactions rose to CAD 9.63b, leading indicators rose 0.3% mom, manufacturing rose 0.4% mom in December.
The pound slumped against the US dollar and the euro as the BOE revised lower it growth forecasts despite higher inflationary outlook in the near-term. In its quarterly inflation report, the BOE unveiled the outlook that inflation will most likely fall a little below the target in the second half of 2012, but the risks relative to that most likely path are 'skewed to the upside'. Growth forecasts were revised lower as higher interest rate assumption (1%) was used and GDP growth in 4Q10 was weak. More in BOE Raised Inflation Forecasts, Yet Lowered Growth Outlook. Job data in UK saw claimant count unexpectedly rose 2.4k in January. Unemployment rate was unchanged at 7.9% in December.
Portugal sold EUR 1b of 12 months bills today, at the maximum intended amount. Demand was weaker than prior auction with bid-to-cover ratio at 1.9. Nevertheless, it's still at a healthy level. Yield rose to 3.987%, well below expectation of 4.3% and the record of over 5% hit in December. Bank of Portugal governor Carlos Costa said today that the country is already in recession. He said the dynamic of the macro-economic variables will produce what we said and what international institutions confirmed -- a recession in 2011 that is the counterpart of the adjustment process, of austerity. Portugal Finance Minister Fernando Teixeira dos Santos complained that the move to reform Eurozone's bailout resources and economic governance are too slow and this slow pace and the sense of hesitation will affect the eurozone and efforts to stabilize the euro, and as a result, all those countries which are in the eurozone,
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