Industrial output bounces, capacity utilisation keeps climbing

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  • US industrial production bounces back in February, in line with the latest solid readings of manufacturing ISM.
  •  Capacity utilisation reaches the highest point since 2015 pointing to continuously rebuilding inflationary pressures.
  •  Euro loses ground against the greenback following the industrial data.

 
US industrial production jumped 1.1% last month compared to January easily beating market expectations as the bar had been set quite low at 0.4%. On the other hand, the prior value was revised down from -0.1% to -0.3%, albeit it was not enough to spoil moods among US dollar traders as the greenback has actually gotten back some of its appeal. The report illustrates at the same time that inflationary pressure ought to continue rebuilding over the course of the upcoming months making the fourth rate hike this year somewhat more likely.

 

  • US industrial output kept advancing in February in line indications coming from manufacturing ISM.

First and foremost, one needs to admit that the improvement proved to be really broad-based as rises were seen from automobile production or oil and gas drilling. Based on the recent re-acceleration seen in manufacturing ISM one may second-guess that the trend has a chance to continue developing in the positive direction. If so, it could enhance market expectations with regard to the quicker than initially thought pace of rate hikes delivered by the Federal Reserve this year. Moreover, today’s data gave another hint regarding rebuilding inflationary pressure as capacity utilization increased from 77.4% to 78.1%, the highest point since late 2015.

 

  • Momentum in capacity utilization has already outstripped the levels seen in mid-2014 being the highest since 2011.

While capacity utilization in absolute numbers has yet to outpace the high from 2014 it has done so when we take a look at a year-over-year basis. The higher capacity utilization the higher pressure to increase prices therefore it could be welcomed by the Federal Reserve which is broadly expected to hike rates next week.

 

  • The EUR/USD has failed to break above its crucial resistance area in the vicinity of 1.2345, and then it’s resumed falling. Technically the pair could carry on declining in the short-term targeting as low as 1.2150 - the level to watch when it comes to the long-term backdrop.