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EU: Modest Q4 Growth Reported Ahead of Rate Decision

EU: Modest Q4 Growth Reported Ahead of Rate Decision

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The European Statistics Office reported advancing regional growth in the whole Euro Area for the month of February, rising for the 20th consecutive month. Nevertheless, with the global economy expected to worsen and growth forecast below trend according to the International Monetary Fund, the European Central Bank is preparing additional stimulus to offset the projected slowdown.

Euro Economy Advanced in Q4

Gross domestic product figures released by the European Statistics Office for the final quarter of 2015 showed modest improvement over the prior reading. Fourth quarter expansion printed at 0.30%, matching both expectations and preliminary and revised estimates of 0.30% obtained in February. On an annualized basis, the data managed to surprise market participants after surpassing the previous value of 1.50%, climbing to 1.60% with both household and government spending leading the way. In spite of rising GDP values, the President of the European Central Bank is anticipated announce more stimulus on Thursday’s monetary policy meeting as the Euro Area once again encounters deflationary pressures.  Headwinds arising from turmoil in financial markets amid a slowdown in the Chinese economy will continue to weigh on the outlook. The Euro continued to rally versus major currencies, with EURUSD reaching a price of 1.1030 following the report.

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Swiss Deflation Decelerates

Switzerland reported moderate gains in consumer prices during the month of February according to the latest figures released by the Swiss Federal Statistical Office. On a monthly basis, inflation rose from -0.40% to 0.20%, exceeding estimates of -0.10% and helping the country climb out of the prevailing deflationary trend. On a year over year basis, consumer prices remained firmly in deflationary area at -0.80%, improving from previous reading’s value of -1.30%. The ongoing declines in the costs of health, transportation and food slowed in February, helping to boost the figure. Despite the gains, economists anticipate that the strong Swiss Franc and low energy prices will continue to drag on inflation, keeping the measure below the target set by the Swiss National Bank. With interest rates in negative territory for a little over a year, progress remains elusive, with the central bank stating that rates could be slashed further if deemed necessary.

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Canadian Building Permits Sink

After building permits reportedly soared by 11.30% in the month of December, that figure was revised lower to 7.70% by Statistics Canada with the report also citing a -9.80% plunge during the month of January, missing estimates of a -2.50% contraction. The decline in construction has been strongly reflected by permits of multi-family housings slumping by -21.00% and single-family homes sliding by -4.10%. The Bank of Canada has kept rates unchanged at 0.50% in order to help boost borrowing. The central bank is set to announce a monetary policy decision later in the session which is expected to see prevailing measures and interest rates remain steady in an effort to boost momentum towards reaching the 2% inflation target. The Canadian dollar reversed from recent strength against the US dollar, with the USDCAD currency pair rallying to 1.3335, reflecting the poor outcome of the report.

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Turkish Industrial Production Improves

Turkish industrial output increased on an annualized basis in January, surpassing expectations of 4.30% and prior month’s value of 4.50% with the Turkish Statistical Institute reporting 5.60% expansion. This marked the biggest rise in the last 5 months and the 12th consecutive rise recorded, with manufacturing growing by 5.80% and mining and quarrying up by 4.10%, offsetting the declines from the previous month’s reading. Demand for non-durable goods grew by 8.50% and durable consumer products by 6.60%. On a monthly basis, industrial production rose by 1%. The weakness in the Turkish Lira is continuing to help price products at a more attractive level on a relative basis, helping to bolster the country’s exports. The currency is forecast to face further pressure from continuing political uncertainty following the most recent deal with Europe regarding the refugee crisis. The Lira gained modestly against the US dollar, hitting 2.9218 during the announcement.

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