China in line as the US takes a hit

• UK inflation (very slightly) negative for the first time at -0.01%

• US retail sales miss expectations at 0.9%

• China GDP hits expectations and target of 7%

• All other China data suggests weakness

UK deflation fails to do much to dent sterling

UK inflation was the main story yesterday, alongside the unveiling of various election manifestos. The inflation print at a headline level was 0.0%, though many commentators picked up that if you went to enough decimal places, it was in fact negative for the first time. This had relatively little impact on sterling which was already braced for a headline negative print. The next few months are expected to remain around noflation or deflation as oil, food and clothing prices will continue to drag until around September.

All eyes in Europe on the ECB

It’s decision day for the ECB today, with the press conference following at 1.30. This should really be one of the easiest decisions they have had – the prescribed level of asset purchases have been completed and early indications are that it is having the desired impact, so there should be no surprises in terms of change in policy. There may be a mention of Greece and their banks and funding provision, but other that than I would expect a reasonably calm affair.

Industrial production came out much stronger across the Eurozone with a year on year increase of 1.6% compared with 0.7% expectations and 1.2% last month. The weaker euro will also be playing a big part in the transmission of the quantitative easing to the wider Eurozone economy. On this basis, I would expect the balance of trade figures to show a bounce back towards EUR20bn as exports continue to outpace imports.

US data takes a turn for the worse

We were expecting to see an uptick in US retail sales with the improvements in the weather, but it didn’t materialise. March came in at 0.9% compared with expectations above 1% month on month, with February’s figure revised down to -0.5%. We also saw the IMF downgrading US growth and upgrading European growth based on their relative currency strength and rate paths. This saw a general sell off with the dollar losing 1-1.5% against sterling and the euro. The Fed’s Kocherlakota was speaking again overnight and warning of the dangers of raising rates in 2015, suggesting low inflation means unemployment is still too high. Fed members Bullard, Lacker and Fischer speak later, along with US industrial production figures and the Bank of Canada interest rate decision.

There was a raft of data overnight from China with Q1 GDP coming in exactly where it is prescribed to be at 7%. The rest of the data was pretty poor with industrial output showing the slowest growth since 2008 , retail sales the slowest since 2006 and fixed asset investment the lowest since 2000. Despite being a fairly close China proxy and consumer confidence for April dipping to -3.2%, the Aussie dollar held up remarkably well.

Have a great day!