Europe Ahead: Major economies to release important inflation data

Today, markets will witness the release of important inflation data
from UK, euro zone and US, amid concerns there may be inflationary
pressures in the coming period after the remarkable rise in oil
prices.

Starting with the UK, annual PPI output is expected to remain at 3.9%
in December and annual PPI input is estimated to rise to 10.2% from
9.0%, where in November, the reading recorded its third consecutive
soar.

In fact, the rise witnessed recently in inflation reflects the
increase in oil prices over the past period as it affected imports
along with the appreciation of the pound against majors which lifts
the cost paid by British manufacturers.

Oil climbed to a high of $92.02 a barrel in December, while the pound
rebounded slightly against the dollar to reach a high of 1.5910
compared with the month's opening level at 1.5560.

Meanwhile, inflation rate is 3.3%, according to CPI gauge for
December, hovering above the bank's upper limit since February, yet
the BoE left both interest rate and APF quantity unchanged yesterday.
However, expectations refer that the BoE will raise interest rate in
the last quarter of 2011, while the possibility of expanding the APF
remains under question as it will depend largely of the impact of the
sharp governmental spending cuts and rise in VAT on growth prospects
as well as the level of inflation.

Moving to the euro area, CPI for December is expected to come in line
with CPI estimate at 2.2% annually to move above the bank's 2% target
for the first time since November 2008 when it reached 2.10%.
Yesterday, the ECB left interest rate steady at 1.00% to continue its
support to the economy that is facing a tough task to trim the huge
budget deficit which prompted policy makers to announce severe
spending cuts to lower the deficit.

Trichet mentioned the rise in prices, which is triggered by the climb
in oil prices, will continue for some months, yet outlook for
inflation remains broadly balanced as the upward pressure is only on
the short term.

We saw this week successful bond selling by Portugal, Spain and Italy
which managed to restore some confidence in markets ahead of European
Finance Minister's meeting next week where they will discuss the
possibility of expanding the European rescue fund.
Finally, the US will release CPI for December followed by other US
important data.
Source: Fxstreet.com