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    FX News Today

    German PPI falls 3% in February: The index of producer prices for industrial products fell by 3.0% compared with the corresponding month of the preceding year. In January 2016 the annual rate of change all over had been –2.4%.In February 2016 energy prices decreased by 9.4% compared with February 2015, prices of intermediate goods by 2.2%. In contrast prices of non-durable consumer goods rose by 0.2%, prices of capital goods by 0.7% and prices of durable consumer goods by 1.4%.The overall index disregarding energy decreased by 0.7% compared with February 2015.Compared with the preceding month the overall index fell by 0.5% in February 2016 (–0.7% in January 2016 and –0.5% in December 2015).

    European Outlook: Asian stock markets moved broadly higher, with Japanese markets again the notable exception and weighed down by ongoing strength in the Yen. US and especially UK stock futures are also up and UK stock markets seem set to outperform again. Eurozone stocks failed to extend gains yesterday and especially the DAX was hit by the strength of the EUR, which climbed above 1.13 against the USD. With the round of central bank decisions out of the way markets can get down to closer evaluation of the measures and implications, but currency reactions already showed that the race to the bottom on rates doesn’t always have the desired effect. Oil continued to rally as WTI traded over $40 and the mood heading into the London session remains mostly risk-on, Brent crude prices have logged a three-month high at $41.69. The mood looks likely to continue with scheduled Fed speakers today being known doves.

    BoE & SNB – Both in Wait and See Mode: BoE and SNB left policy on hold yesterday and the statements were if anything less dovish than some may have hoped for. The BoE left its implicit tightening bias in place, even if rate hike expectations have been pushed out into 2017 and the bank is effectively on hold. The SNB meanwhile noted a weaker growth environment and lowered its inflation projections, but argued that its current negative rate, coupled with ad hoc intervention on forex markets should be sufficient to cope with that.

     ECB’s Draghi “stands ready to use all instruments” in a timely repetition of last week’s dovish statements, arguing that the ECB’s package was very strong and will channel financing to the real economy, while interest rates will remain steady to lower for an extended time. Though he sees some signs of economy improvement, risks remain to the downside. The euro has pulled back from highs, though this merely confirms the FX games continue after BoJ’s Kuroda suggested rates could go as low as -0.5% under NIRP earlier this week and the BoJ made some inquiries into just what was driving the yen firmer yesterday.

     

    Main Macro Events Today

    • CAD CPI: We expect CPI, to slow to a 1.3% y/y pace in February (median 1.5%) after the 2.0% y/y growth pace in January that was the fastest annual CPI growth rate since November of 2014. CPI is seen rising 0.1% on a month comparable basis in February (median 0.2%) after the 0.2% gain in January. The BoC’s core CPI index is seen rising 0.7% m/m in February, consistent with recent moves in this not seasonally adjusted index during February, after the 0.3% gain in January. Annual core CPI growth is expected to expand at a 2.2% y/y rate in February (median 2.1%), up from the 2.0% pace in January. The expected core CPI figure would, of course, leave the measure above the BoC’s 2.0% midpoint. Governor Poloz has maintained that the elevated core CPI growth rates are transitory and not reflective of a tightening in supply conditions.
    • US Michigan Consumer Sentiment: U.S. Michigan Consumer Sentiment Preview: The first release on Michigan Sentiment is out Friday and should show a rise to 92.0 (median 92.2) from 91.7 in February. Current conditions should be 106.9 from 106.8 in February and expectations should be 82.0 from 81.9 in February. The IBD/TIPP Poll for the month rose to 46.8 from 47.8 and we expect the Bloomberg Consumer Comfort survey to average 44.0 in March.

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