U.S. Producer Prices Rise More Than Expected In February

Wholesale prices rose again in February, according to new data released by the government on Tuesday. The pace of growth slowed notably from the previous month, but the advance was stronger than economists had expected.

Core prices increased as well, posting the highest rate of growth in 10 months. The news, which could indicate some inflationary pressure building in the pipeline, comes out as the Federal Reserve begins its two-day interest rate meeting.

The U.S. Labor Department said its producer price index for final demand advanced by 0.3 percent in February. This followed a rise of 0.6 percent in January. Economists had expected PPI to rise by 0.1 percent for the month.

Core prices showed a similar advance in the month. Excluding volatile sectors like food and energy, prices also climbed by 0.3%. This was the biggest increase in core prices since April of 2016.

For the 12 months ending in February, core prices were up 1.8 percent. Headline prices, which include those volatile sectors, was up 2.2 percent on a 12-month basis. The Labor Department pointed out that this was the largest advance for the headline number since the 12 months ended March 2012.

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Euro Weakens On German ZEW Survey, Dutch Election Worries

The euro slipped against its major counterparts in the European session on Tuesday, as data showed that German economic sentiment improved less than expected in March, as well as on concerns over the Netherlands’ elections tomorrow, amid rising tide of populism in Europe.

Survey data from the the Mannheim-based Centre for European Economic Research/ZEW showed that the ZEW Indicator of Economic Sentiment gained 2.4 points to 12.8 in March. The score was below the long-term average of 23.9 and the expected level of 13.0.

The current conditions index of the survey rose 0.9 points to 77.3 in March. The expected reading was 78.0.

Preliminary data from Eurostat showed that Eurozone industrial production growth eased at a faster-than-expected pace at the start of the year amid weaker gains in almost all sectors.

Industrial production rose 0.6 percent year-on-year following 2.5 percent growth in December, which was revised from 2 percent. Economists had forecast 0.9 percent gain.

With Dutch Parliamentary election due tomorrow, investors fret over strong showing of the eurosceptic candidate Geert Wilders in polls, which risks fragmentation of the currency bloc.

Opinion polls were divided on Monday, with two showing the ruling party ahead of the anti-European Union Freedom Party, while the other showed both of them are running almost neck-and-neck in the tight race.

The euro held steady against its major counterparts in the Asian session, with the exception of the pound.

The single currency dropped to a 4-day low of 1.0629 against the greenback, compared to Monday’s closing value of 1.0651. Continuation of the euro’s downtrend may see it challenging support around the 1.05 zone.

The euro declined to a 4-day low of 1.0719 against the Swiss franc and held steady thereafter. Further weakness may take the euro to a support around the 1.06 region.

Pulling away from an early high of 122.63 against the Japanese yen, the common currency slid to a session’s low of 122.14. The next possible support for the euro may be located around the 120.5 area.

The euro pared gains to 1.5374 against the kiwi, from a high of 1.5431 hit at 4:00 am ET. The euro is poised to find support around the 1.52 region.

The euro weakened to a 3-day low of 1.4053 against the aussie, after climbing to 1.4112 in the Asian session. The euro is seen finding support around the 1.39 zone.

On the flip side, the euro held firm against the pound with the pair trading at 0.8766. The pair was valued at 0.8718 when it finished Monday’s trading.

Bank of England’s Charlotte Hogg offered her resignation after lawmakers sharply criticized her for not disclosing about her brother’s job in Barclays Plc.

The Treasury Select Committee remarked in a report that Hogg’s “professional competence falls short of the very high standards required to fulfill the additional responsibilities of Deputy Governor for Markets and Banking”.

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Draghi says Innovative Technology Could Boost Productivity in Eurozone

Speaking at a conference in Frankfurt, the European Central Bank (ECB) president Mario Draghi said on Monday that Europe could still see ‘sizeable gains’ in productivity and that there are several ways to boost productivity in the ways seen in the past.

Draghi said that productivity growth depended not only on the creation of new ideas, but also their diffusion. Draghi noted that there was potential in the euro area to create an environment to spur innovation by bringing spending on research to the higher levels seen in other advanced economies and dismantling barriers to innovative activity.

“Higher productivity growth is also vital to safeguard Europe’s economic model of high wages and social protection, and hence to counter the sense of economic insecurity that is currently prevalent in several advanced economies,” Draghi said.

The ECB at its policy meeting last week acknowledged signs of an improving eurozone economy, but said it would keep cheap money gushing for fear of undermining the recovery. Investors are now betting that the ECB will start raising rates before the end of its quantitative easing.

Bloomberg survey showed forward swaps based on the Euro Overnight Index Average are pricing 10 basis points of rate increase by April next year, compared with less than three at the end of last month.

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Oil Hugs $48 As OPEC Acknowledges U.S. Glut

Crude oil futures were little changed Tuesday as markets braced for the Federal Reserve interest rate decision and U.S. oil inventories data.

The Fed is all but certain to raise rates tomorrow, but questions linger about how aggressively they will tighten over the course of the year.

Meanwhile, the American Petroleum Institute will release its oil inventories report this afternoon, followed tomorrow by the Energy Information Administration.

Oil stockpiles have surges to record highs over the past few months, as domestic producers have added active rigs at a breakneck pace.

OPEC today acknowledged “growing US output and stubbornly high stockpiles kept price gains in check and contained prices within a tight range”.

WTI light sweet crude oil was down 20 cents at $48.22 a barrel, having touched the lowest since November.

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Gold Stable Near $1200 As Fed Preps Rate Call

Gold futures were flat Tuesday morning, with traders on the sidelines ahead of tomorrow’s interest rate announcement from the Federal Reserve.

The Fed is expected to raise interest rates and offer a relatively hawkish outlook via its so-called dot-plot.

Markets are also keeping a close eye on European elections this week, as anti-immigration parties are gaining momentum in France and the Netherlands.

Meanwhile, the U.K. government’s Brexit bill has passed its final House of Commons hurdle, paving the way for Prime Minister Theresa May to trigger Article 50 so the U.K. can leave the European Union.

Gold was up 1 dollar at $1205 an ounce, having seen little movement this week after big losses a week ago.

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Slovakia CPI Rises Further In February

Slovakia’s consumer prices increased for the third straight month in February, data from the Statistical Office of the Slovak Republic showed Tuesday.

The consumer price index climbed 1.2 percent year-over-year in February, faster than the 0.7 percent rise in the preceding month.

Transport costs surged 7.2 percent annually in February and prices of food and non-alcoholic beverages went up by 2.4 percent. Meanwhile, clothing and footwear prices dropped 0.3 percent.

On a monthly basis, consumer prices rose 0.5 percent from January, when it increased by 0.3 percent.

Core inflation accelerated to 1.9 percent in February from 1.3 percent in January. Month-on-month, core consumer prices grew 0.6 percent.

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Indian Rupee At Near 15-month High Vs U.S. Dollar After WPI Data

The Indian rupee firmed against the U.S. dollar in evening trading on Tuesday, after data showing bigger-than-expected increase in wholesale price inflation in February prompted investors to rule out the possibility of rate cut any time soon.

Preliminary data from the Ministry of Commerce & Industry showed that India’s wholesale price inflation accelerated at a faster-than-expected pace in February.

Wholesale prices climbed 6.55 percent year-over-year in February, following a 5.25 percent increase in the prior month. Economists had expected the inflation to rise to 6.1 percent.

Further underpinning the currency was the sweeping state election victory of ruling party, which helped bolster expectations for continuation of key reform measures.

The Indian rupee advanced to 65.86 against the greenback, a level unseen since December 2015. At Monday’s close, the pair was valued at 66.15. Continuation of the rupee’s uptrend may see it challenging resistance around the 64.5 region.

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