Euro Zone Industrial Output Unexpectedly Falls

Daily Analysis - 12/04/2017

Sharp Drop in Energy Production

Euro Zone industrial output fell in February, compared to market expectations of a modest increase, hurt by a sharp drop in energy production. The latest data has dampened hopes of robust economic growth, which were fuelled after a number of key economic indicator started painting a bullish picture.

French, Spanish Output Underwhelms

Industrial production in the single currency bloc dipped by 0.30% from January, the European Union's statistics office Eurostat said Tuesday. However, on a year-on-year basis, it rose 1.20%. Both figures were below the consensus market expectation of increases of 0.10% for the month and a 2.00% percent rise from the year ago. January's output numbers were also lowered.

At the national level, German industrial production grew by 0.80% from January, while France and Spain recorded declines of 1.60% and 0.30% respectively. The tepid output figures contrast a strong Markit PMI reading and better than expected investor sentiment data from the Frankfurt based Sentix Research Group. EURUSD is range bound in early Wednesday trading, with the pair hovering around the 1.0600-mark.

U.K. Inflation Holds Steady

U.K. inflation held steady in March, with consumer prices increasing by 2.30% compared to a year earlier, the Office for National Statistics said yesterday. The figure was in line with economists' expectations in a Reuters survey. Inflation in the U.K. has accelerated in recent months, largely on account of a weakening of the British pound since the “Brexit” vote, as well as a rise in oil prices.

Confronted with the conundrum of rising wages, most Bank of England policymakers have indicated they see no urgency to lift interest rates, even as inflation is predicted to peak at 2.80% in around 12-months. GBPUSD is rallying since the release of inflation data, and was last seen just below the strong resistance around 1.25000.

Producer Inflation Cools in China

Producer price inflation in China cooled for the first time in 7 months in March as coal and iron ore prices tumbled amid fears that domestic demand was softening. The producer price index gained 7.60% last month from a year earlier, the National Bureau of Statistics said Wednesday.

Consumer inflation continues to remain within the central bank's upper threshold, giving it enough room to move ahead with gradual monetary tightening without the risk of crippling economic growth. AUDUSD, which is heavily linked to fluctuations in Chinese economic data, is currently trading around 0.74900.

Mexico Industrial Production Climbs

Mexican industrial output climbed 0.10% in February from January on a seasonally adjusted basis, helped by an increase in construction activity that more than offset weakness in mining and utilities, according to figures released by the national statistics agency late Tuesday. Economists had projected a 0.10% decline on a monthly basis. Construction grew 0.90% in February from January, while mining contracted 1.00%, and utilities dropped 1.50%.

Manufacturing remained largely unchanged. On a year-over-year basis, industrial output fell 1.70% in February. The latest annual drop in industrial production was led by a 13.70% plunge in mining output and a 2.40% slump in the utility sector output. USDMXN is currently perched around 18.78500, after plotting a smart bounce back in late Tuesday trading.