China Industrial & Retail Growth Slows

Daily Analysis - 14/03/2016

China’s Industrial & Retail Sales Growth Slow in Jan-Feb


Industrial production numbers out of China released over the weekend showed a year over year growth of 5.40%, down from the previous 6.10%. Retail sales on a year-to-date basis also showed a slower pace of gains at 10.20% highlighting the continuing pressure on the PBoC to step up its monetary policy.

Trade Deficit Eases, Sterling Gains

UK trade data released on Friday by the Office for National Statistics (ONS) showed a narrowing deficit in January, following an upward revision to December figures. The UK trade deficit in goods and services dropped to 3.5 billion Pounds in January, more than the forecasts of 3 billion, but less than the 3.7 billion in December. Exports in the UK remained unchanged for two months, while imports fell by 0.2 billion GBP in the same period. Fuel prices were the main driver for pushing imports lower. UK's exports to the EU increased for the month with trade with Germany and France ranking high. While there was speculation that the weaker exchange rate helped in boosting trade exports, ONS analysts said that there was no concrete evidence of this. Besides the trade data, UK construction output showed a decline, driven by weaker infrastructure and public housing projects. Between December and January, the UK's construction output fell -0.20% while production also declined compared to the previous month. The British Pound continued to trade stronger on Friday trading near $1.43.


German Consumer Inflation Slows in February

Consumer prices in Germany rose a modest 0.40% in February but stayed flat on a yearly basis putting to rest any hopes of reaching the 2.0% inflation target. Data released on Friday showed that the CPI, measured on a yearly basis, remained zero bound in line with the preliminary numbers released end of February. Energy prices were markedly lower in February 2016, down by nearly -8.50% from a year ago. On a month over month basis, consumer inflation grew at a pace of 0.40% but came out lower than the EU Commission's forecasts of seeing 0.50% growth in inflation in 2016.


Canadian Dollar Falls on Disappointing Jobs Report

The Harmonized Index of Consumer Prices or HICP confirmed a decline of -0.20% from 0.40% on a year over year basis. The lower inflation rate comes about as last week, Germany's Euro trade surplus declined in January to 13.6 billion Euros in the month of January, down from the 19 billion surplus in December. Last week the European Central Bank announced a host of monetary easing tools including cutting interest rates across the board and ramping up the monthly bond purchases by an additional 20 billion Euros. EURUSD which gained after the ECB’s announcement closed Friday with prices settling near $1.114.


Oil May Have Bottomed, IEA Says

The Canadian dollar pared the previous BoC led gains after the monthly jobs report for February showed a broad disappointment. Canada's unemployment rate ticked higher to 7.30%, up from 7.20% previously while reporting a loss of 2,300 jobs from a month ago. Analysts were expecting to see 10,000 new jobs being added to the economy. The disappointing jobs report comes in a week where the Bank of Canada left interest rates unchanged as non-energy exports gained momentum. Canada's economy grew at a pace of 0.80% on a year over year basis in the fourth quarter of 2015, slowing from 2.40% in the previous quarter. Earlier, Canada's household debt numbers showed an increase in the fourth quarter of 2015 as growth in borrowing continued to beat gains in after tax incomes, which advanced 0.60% while borrowing increased at a pace of 1.60% in the quarter. USDCAD rebounded strongly on the reports after posting a session low near C$1.3239.


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