European Confidence sends mixed signals but remain at three-year high

European confidence report was released, showing mixed performance in
various sectors in the economy, nonetheless, confidence remains near
three-year high, supported by improvement witnessed in Germany's
economy.

The European Commission in Brussels said that Consumer Confidence
improved slightly during January, reaching -11.2 from the previous
-11.4. While the Economic Confidence index slipped in the first month
of this year to 106.5 from the revised 106.6 in December.

Furthermore, the commission showed that industrial confidence rose to
6.0 from the previous revised 4.9, while higher than market
expectations of 5.0. Conversely, the Service Confidence dropped to 9.2
from 9.6 in December.

Germany has been playing a major role in driving European area's
recovery throughout the past year, where German companies boosted
output and spending to overshadow the slump in economic conditions in
indebted countries.

The service in manufacturing sectors both showed improvement in
conditions, while Germany's business confidence accelerated to the
highest level on record during January.

The depreciation of the euro against the dollar during the past period
by nearly 3.0 percent, helped boost European exports, allowing
companies such as SAP AG to predict a rise in operating profits as
much as 16 percent.

ECB's President; Juan Claude Trichet said earlier this month that
"strong business confidence could provide more support to domestic
economic activity in the euro area than is currently expected." The
bank predicts an expansion rate for the region this year around 1.4
percent.

However, Trichet said today that the bank will not react to the recent
rise in inflation levels, which is caused by elevated commodity prices
and rising cost of the energy bill that may tamper recovery and offset
the progress in various sectors in the economy.

The IMF said on January 25 that global growth will average 4.4 percent
this year, compared with earlier projections that forecast a growth
rate of 4.2 percent.

The euro/dollar pair traded higher, reaching 1.3725 levels, compared
with the opening levels of 1.3712. The pair is headed to test the
resistance at 1.3755, which if breached, would pave the path for the
pair to target 1.3890.
Source: Fxstreet.com