Positive Consumer Confidence in Germany

Consumer confidence in Germany will
increase in February from a 7-month low, suggests the GFK survey.
The survey stated 5.8 marginally above expectations of 5.7 and
better than January’s revised 5.7 survey result. The news will come
at a good time as the German economy has been feeling the brunt of
the European debt crisis and only grew 0.7% in 2012, down from 3.0%
growth in 2011. The European Central Bank has predicted that the
Euro-zone economy will start its recovery later this year, which
should support activity in Europe’s largest economy. A jump in
German GDP growth would lead to a Euro rally. Despite the news, the
Euro has not moved significantly and instead fell below 1.3450 in
trading against the Greenback. EUR/USD set a new 11-month high in
Forex trading on Friday at 1.3479, which may now provide
resistance.

As we look to the rest of this week
its hectic in terms of US data releases keep investors entertained
however there should be little to harm the optimistic attitude to
risk over coming days. Key events include the US January jobs
report (forecast +160k) and Fed FOMC meeting (no change expected)
alongside manufacturing confidence and Q4 GDP. In the Eurozone,
data will play a supporting role to Eurozone banks’ balance sheets,
with additional capital inflows likely to be exposed, marking
another positive development following last week’s strong payback
of Long Term Refinancing Operation funds.

Finally, Sterling has fallen
further and was not assisted by the larger than projected fall Q4
GDP exposed last week which now genuinely increases the
possibilities of a ‘triple dip’ recession. The lack of room on the
fiscal front suggests the possibility for more forceful Bank of
England monetary policy particularly under the watch of a new
governor and potentially further GBP weakness.