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Inflating (or not)

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  • After all the bad GDP news in the Euro area, it is a somewhat surprising relief to have better than expected GDP from somewhere - Japan. The consumer seems to have helped (though prior to the additional BoJ easing). The dark cloud in the data is the evidence of a very weak deflation environment.
  • Inflation is due in the Euro area, where the market is expecting a further decline towards 1% (the ECB inflation target - remember that? - is "close to" 2%). The IMF approved a loan to Cyprus - no surprise, but doubtless the Cypriots will welcome the cash.
  • The US inflation number will be dragged down on the headline by weaker energy prices, but the core should continue to rise. Housing starts data is likely to be somewhat softer than last month as there is some payback from the March strength.
  • The US Philly Fed survey of corporate confidence is likely to be a key focus, following a series of weaker sentiment readings recently. Industrial production was also softer yesterday - and was about more than the weather impact. We suspect inventory adjustment may be behind this.

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