European Finance Chiefs Pledge to Increase Safety for Debt-Laden Economies, UK Data Add to Concerns

Last week, the European continent witnessed the release of important
data, where German data showed improvement while UK figures added to
concerns.

Starting with the euro zone, the main highlight of the week was on the
European Finance chiefs' two-day meeting in Brussels which came out
with a pledge from European chiefs to increase safety for debt-mired
economies, yet they did not make a final decision by either expanding
the 750 billion-euro package or providing cheaper emergency loans, as
they said there is no current pressure to take immediate actions.

Despite the postponement of expanding the European rescue fund till
the coming meeting, before the deadline in March, the euro responded
positively by rising to five-week high against the dollar.

Bond yield, especially in Portugal and Germany, though remained high
amid debt concerns that were not eased by Moody's announcement that
the Portuguese export performance is strong as the rating agency
questioned the sustainability of the overseas sales in the region's
highly indebted nation.

Moreover, the better-than-estimated data in Germany, the largest
economy in the euro zone, boosted hopes that the gigantic economy will
lead the recovery this year as it did in 2010.

German business confidence rose to 110.3 in January from the revised
109.8 in December, while investor confidence (current situation) edged
up to 82.8 in January from 82.6 and economic sentiment gauge increased
to 15.4 from 4.3.

Moving to the UK, the data released this week added to worries as
inflation leaped to 3.7 percent, eight-month high, in December from
3.3 percent in November, where prices continue to remain above the
BoE' upper limit of 3 percent since February 2010.

RPI figures also showed rise to increase speculations the BoE will be
forced to hike borrowing cost faster that expected to tame inflation.
In addition, in spite of the drop in jobless claims to 4.1 thousands
in December, the lowest in 21 months, from the revised reading of 3.2
thousands decline, unemployment rate remained high at 7.9 percent in
the three months ending November.

In fact, the rise in both inflation and unemployment along with the
cold weather in December resulted in the decline in retail sales as
the reading excluding auto fuel retreated 0.3 percent last month from
0.3 percent in November and the reading with auto fuel dropped 0.8
percent from the revised 0.4 percent.
Source: Fxstreet.com