Mixed data from European Services and Manufacturing sectors

Despite of its expansion at an accelerated pace in more than
six-months in January, Manufacturing and Services sectors in Europe
sent mixed signals about their performance over the past few weeks;
manufacturing activities dropped in Germany and Euro-Zone, while the
services sector continued to show improvement.

The Composite index, based on a survey done on Euro-Zone purchasing
managers, expanded by 56.3 during January from December's 55.5. A
reading above 50 is considered an expansion. Analysts forecast a
reading of 55.6.

Meanwhile, PMI Manufacturing index rose 56.9 in January compared to
57.1 in December, while the Services index expanded to 55.2 from 54.2
in the prior month and expected 54.3.

Business confidence in Germany and France helped ease the pressure of
the rising euro, with Spain and Greece's toughened austerity
measures. German manufacturing gauge declined to 60.2 in January from
60.7 in December, while the service index rose to 60.0 from 59.2.
ECB's Trichet noted during the last rate decision meeting press
conference that "strong business confidence could provide more
support to domestic economic activity in the euro area, than what 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, which may tamper recovery and
offset the progress in various sectors in the economy.

Trichet said in an interview with the Wall Street Journal; "All
central banks, in periods like this where you have inflation threats
that are coming from commodities, have to go through the hump and be
very careful that there are no second- round effects".

Inflation rose above the bank's desired rate of 2.0 percent in
December where it reached 2.2 percent, although Trichet still noted
that the bank's monetary policy will remain unchanged at the time
being. Nonetheless, he assured that the bank will "monitor
closely" inflation levels and intervene when needed.

Source: Fxstreet.com