PBoC Weakens Yuan, Risk Aversion Jumps

Industrial production in the Eurozone missed estimates, falling 0.80% in February more than analysts' forecasts of a 0.60% decline. The dip in February follows January's downward revised print of 1.90% against earlier estimates of 2.10%. The weak industrial production data came with weaker data from Ireland and Greece weighing in on the headline print. Among the sectors, consumer goods and energy production saw the biggest drag while capital goods saw marginal declines. Non-durable consumer goods fell 1.80% with intermediate goods staying stable. Over the year, industrial production rose 0.80%, missing expectations of a 1.20% increase.

The Bank of Canada, at its monthly monetary policy review meeting yesterday left the main interest rate unchanged at 0.50% as widely expected by analysts. The BoC sounded cautious, noting that the global slump in commodity prices may continue to weigh on Canada's growth over the next several years. Despite the cautious tone, the central bank revised its forecasts for GDP higher for 2016 at 1.70% and 2.30% for 2017. Acknowledging the government's fiscal stimulus spending announced earlier in March, the central bank said that the new measures could add as much as 0.50% to GDP growth in 2016 and 0.60% in 2017. Commenting on the stronger than expected first quarter data, the bank said that it provided the markets with false hope as it expects the gains to be reversed in the second quarter but said that real GDP growth could average 2.0% in the first half of 2016. The bank revised Q1 GDP up to 2.80% from 1.0% previously and forecasted Q2 growth was revised down to 1.0% from 2.20% previously.