Europe Ahead: A-class fundamentals from the UK to be released, yet inflation data will be the main highlight

This week, the main highlight will be on data from the UK while the
euro zone will release less important fundamentals.
Probably, the main highlight will be inflation data after the rise
witnessed last week in PPI data and amid the inflationary pressures
global economies are facing after the rise in commodity prices,
especially oil which led to "cost push inflation."

Crude prices rose to a high of $92.02 a barrel in December to continue
its rise for the fourth consecutive month while it was traded at
$72.00 at the beginning of 2010.

CPI released this week is expected to inch up to 3.4% in December from
the prior 3.3%, while on the monthly basis the rate will rise to 0.7%
from 0.4%.

Last week, the BoE left both interest rate and APF quantity unchanged
at 0.50% and 200 billion pounds, but expectations refer that there may
be a possible hike in interest rate later in the year, especially if
prices continued its rally, yet the CERB mentioned last week that the
BoE may also be forced to add to the current APF because the announced
spending cuts and rise in VAT will affect growth prospects.

Cameron expressed his worry about the rise in inflation and said he
will give full support to Mervyn King to shore up inflation to safe
levels.

Annual RPI due is predicted to rise to 4.8% from 4.7%, to add to risks
that inflation will average 4.0% this year, as estimated last week by
the CERB.

On the other hand, the spotlight will be on unemployment data after it
rose in the three months ending October to 7.9%, where expectations
show that it will linger at that level in the three months ending
November.

By extension, claimant count rate will remain at 4.5% in December and
jobless claims will worsen following the 1.2 thousands decline in
November.

Also, retail sales are due this week with expectations to show
decline. Actually, three factors may have negative impact on retail
sales which are the rise in unemployment, price acceleration and the
harsh weather seen in December that was the coldest in nearly 10
decades.

Retail sales excluding auto fuel will retreat by 0.2% from 0.3% a
month earlier while the reading with auto fuel will drop 0.1% from
0.3% in November.
Source: Fxstreet.com