The euro is coming under renewed pressure as the long standing negotiations between Greece and its creditors drag on with no agreement in sight. The lack of a conclusion on the Greek situation is causing some anxiety in the markets and increasing demand for the US dollar’s ‘safe haven’ status.

Greece needs to refinance a €14.5 billion bond on 20 March. Although a second bail out to the tune of €130 billion has been agreed in principle, it is subject to a  number of conditions which the Greek government is clearly struggling to meet. The country’s Prime Minister, Lucas Papdemos, has yet to strike a political consensus on austerity measures in order to secure the next bailout.

As talks drag on and on, Greek finance minister Evangelos Venizelos cautioned that they were now on the razor’s edge with nobody quite knowing which way they will go. German Chancellor Angela Merkel expressed her frustration at how long the talks were dragging on. She warned, “Time is of the essence. A lot is at stake for the entire euro zone.” However she also indicated the EU would not allow a Greek bankruptcy.

Meanwhile, the Daily Telegraph reported that Greek prime minister Lucas Papademos may hold conversations with the “troika” (the European Central Bank, International Monetary Fund and the European Union) before meeting with Greek political leaders and will likely transmit any message that the International Monetary Fund, European Central Bank and the European Union want to express. The British daily supposes that the “troika” will call for more austerity.

By the look of things, it is best not to expect a meeting of the European Union finance ministers to ratify the second bailout until Wednesday at the earliest.

The pound benefited rising against the euro as uncertainty about a Greek bailout continues. However the pound eased against the dollar as nerves about the debt crisis in Europe fuels safe haven demand.

Economic data out of the UK remains a decidedly mixed bag with the British Retail Consortium´s (BRC) reporting that in value terms, UK retail sales in January were down 0.3% on a like-for-like basis from the same month of 2011, when sales rose 2.3%, picking up after December 2010′s snow disruption. Nonetheless, on both measures it was the second-worst January, after January 2010, since the survey began in 1995, the BRC has indicated this morning.

For Stephen Robertson, Director General of the BRC “As 2012 gets underway, it’s clear people don’t feel any better about the immediate future than they did 12 months ago. Customers parked their worries in December and spent, encouraged by discounts. Now, in the New Year, reality has bitten again as concerns about jobs, wages and household costs reassert themselves. Despite consumer confidence improving in January, actual spending shows households concentrating on paying off debt, saving and battening down for another tough year.”

Meanwhile, the Markit/CIPS purchasing managers’ index for the month of January has come in at 56 points, versus a reading of 54 for the month before. The consensus estimate was for a reading of 53. Today’s data has led some economists to cautiously wonder out loud if recent recession fears may not have been a tad overdone although they still expect the Bank of England (BoE) to go through with a further round of asset purchases, but at £50 billion and not the £75 billion initially expected.

Commenting on the data, David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply said that, “compared to the volatility seen through most of last year, sustained and accelerated growth in the service sector is welcome news. A record improvement in the degree of optimism and the highest increase in employment in nearly four years represents a tentative vote of confidence for the year ahead.”

Overnight, the Royal Bank of Australia (RBA) surprised the markets by keeping Australian interest rates unchanged. The markets had expected the first of a series of 0.25% interest rate cuts to reflect anxiety about the outlook for the world economy and the state of play in the euro zone. However the RBA commented that the outlook for the world economy had brightened of late and so they decided to keep interest rates in check. The AUD$ immediately strengthened on the news and is at 20+ year high against the pound.

The pound reached a 10 week high against the US dollar as better than expected manufacturing data from both China and Germany improved risk sentiment and lessened demand for the US dollar’s ‘safe haven’ status.

UK manufacturing data followed suit coming in at an eight month high figure of 52.1. Any figure above 50 indicates expansion.

UK firms advised they are experiencing an increase in new export orders, albeit at a moderate level.

Commenting on the data, David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, is of the opinion that “The UK manufacturing sector has sprung to life in the first month of 2012 to defy any economic gloom, but it is too early to say whether this trend is sustainable. “The marked decline in input prices is good news for the sector’s overall profitability. The boost in output is also welcome, but in reality is bolstered by manufacturers working through existing backlogs, which can only be a short-term fix (…)”

Blerina Uruci, economist at Barclays Capital, for her part, is telling clients that, “The manufacturing PMI and other survey measures have recently indicated this could be the start of a measured recovery in manufacturing, after the sector experienced a rapid deterioration last year. “Nevertheless, manufacturing activity still has some way to go before it reaches the pace of growth seen this time last year. Much will depend on whether the recent pick-up in overall new orders will be sustained and the slowing in export new orders does not bode well in this respect.

The euro also made inroads into the USD after a raft of positive economic data propelled it higher against the dollar. Market sentiment was given a boost after upbeat European manufacturing data and a sharp rise in US construction spending. US private sector payrolls remained steady for the month.

There are however sharp differences between the performance of the euro zone member states with Germany and Austria still leading the way whilst Spain, Italy, and the Netherlands improved but still remain below the 50 point line that separates contraction from expansion.”

The rise in risk sentiment is not only hurting demand for the USD$ but boosting the high yielding commodity driven currencies like the Australian and Canadian dollars which have made a strong start to the trading month.

A quiet start to the trading week saw the pound regain some of the losses incurred last week following the Office of National Statistics data showing a contraction in the UK economy in the fourth quarter of 2011 of 0.2%.

The euro also declined against the US dollar.

Yet another EU summit yesterday in Brussels saw Greece reject a proposal by Germany to give the European Union budgetary supervision power over its spending plans.

The US dollar predictably rose on demand for its ‘safe haven’ status as uncertainty over Greece drags on and Italian and Portuguese bond yields rose.

The market’s attention remains on the euro zone sovereign debt crisis. Hopes remain that Greece will come to an agreement soon with its private creditors. In addition, bond yields have soared in recent days for Portugal raising fears that it will go down the road that Greece is on and require further assistance from the international community.

In response, Portugal is preparing for a second round of asset sales in an attempt to comply with the requisites on in its own €78 billion bailout package that was received last year from the International Monetary Fund (IMF) and the European Union (EU).

The Portuguese government is looking to sell up to a 40% stake of the national power grid and gas pipeline operator as well as a 7% stake in the oil company Galp.

Portuguese Prime Minister Pedro Passos Coelho pointed out last night that his government is close to choosing a buyer for REN and hopes to “very quickly reach a positive result concerning Galp.

“That means that conditions will be set to begin the second wave of privatizations scheduled for this year,” he commented.

In this sense, Portugal is working hard to implement its fiscal promises and reduce its deficit according to the bailout agreed with the IMF and the EU. Fears over a meltdown in Greece taint the country’s sovereign bonds but Passos Coelho assured reporters that there is no risk of a write downs on Portuguese debt. The Prime Minister repeated that it is his intention to return to public debt markets in 2013.

“The Portuguese economy deserves to be defended from the contagion effect that started outside the country. Most important is the removal of financial stress,” he said.

In a quiet data day, the price of homes in the United Kingdom stayed flat during the month of January, according to a survey from Hometrack, reflecting a slow start to the year, with an extension of the seasonal slowdown and weak consumer confidence.

For the property research firm the underlying trend is one of tightening supply and weakening demand.

Furthermore, it states that, “Given the pressure on household finances and the outlook for the wider economy, we expect only a modest improvement in levels of demand in the coming months. The net effect will be a continued negative balance between supply and demand, pointing to further downward pressure on prices in the months ahead.”

The markets remain at a crossroads, continually swinging from risk appetite to risk aversion as news filters out of the euro zone, something that is unlikely to change in the short term.

The pound fell on the announcement yesterday morning that the UK economy contracted by a bigger than expected margin of 0.2% in the fourth and last quarter of 2011 but a steady stream of poor economic data from the euro zone in the afternoon allowed the pound/euro rate to end the day virtually unchanged. After hours, the news from the |Federal Reserve gave a boost to the bulls and risk appetite soared lessening demand for the US dollar’s safe haven status.

In the UK, Office for National Statistics (ONS) reported that UK Gross domestic product (GDP) growth in the United Kingdom contracted at an 0.2% quarterly rate in the fourth quarter. The consensus estimate was for a fall of 0.1% in quarter-on-quarter growth. The tally for the previous quarter was left unchanged, at 0.6% on the quarter.

By sectors of activity, output in construction rose by 0.5% (Previous: 0.3%), remained flat in services (Previous: 0.7%) and fell by 1.2% in the production industries.

As expected, the minutes of the Bank of England’s (BoE) monetary policy committee from their meeting on 12 January showed 9-0 votes both in favour of keeping UK interest rates at their historic lows of 0.5% and keeping the asset purchasing scheme, commonly known as Quantitative Easing (QE) budget unchanged at £275 billion for the time being.

Perhaps a pointer towards the February meeting of the MPC is the fact that even those members of the MPC who thought that further asset purchases were likely to be required thought that, “there was no compelling need to increase the scale of the programme of asset purchases before completing those already announced.” The fact is that the current second round of QE taking the balance up to a total of £275 billion expires at the end of January!

After hours, the US dollar turned lower against major currencies as the Federal Reserve surprised markets with its pledge to keep interest rate close to zero until late 2014.

The Federal Open Market Committee said while the US economy was expanding moderately, the US unemployment rate was still elevated and as such the economy still faced “significant downside risks.”

In recent months, the dollar has been gathering momentum on stronger than expected US economic data. However the Fed’s announcement that interest rates would remain low for some time sent many dollar traders towards the door. The central bank also said it stands ready to implement more quantitative easing if the outlook worsens.

The sole bit of good news out of the euro zone showed that the German Treasury sold €2.46 billion in 30-year debt on bids for more than €5 billion. The average yield offered from this security was an all-time low of 2.62%, down from 2.82% the previous auction. Officials at the German Treasury commented that the latest debt auction results were “impressive”, saying that the low yields offered reflects the current volatile and uncertain environment.

Yesterday evening at the annual World Economic Forum at the Swiss ski resort of Davos, German Chancellor Angela Merkel has once again insisted in the need for a “unified Europe”, repeated her call for a union of “budgets, competition and solidarity”.

Commenting on the euro zone crisis, Merkel feels that “we must ask ourselves what role Europe should play in the world” and added that “we must show that all of the (member states) are strong, although some stronger than others (…)We can only be successful if we are unified.”

Merkel explained Germany’s stance against the concept of Eurobonds or an increase in the bailout fund: “What we do not want is a situation where we promise something that in the end we cannot deliver – because then Europe will be really vulnerable.”

But in a more optimistic tone, she declared herself to be “convinced that we can keep this whole Europe together”.

Euro recovers from S&P with a major bounce

The euro has responded impressively to Standard & Poor’s blanket downgrade of nine eurozone credit ratings (which wouldn’t have been the case had Germany been axed). The market is extremely short of euros and what we are seeing is those short positions being covered, particularly as hopes are raised for a Greek deal on private sector creditors. Whether or not a deal emerges remains to be seen, 60-70% haircuts have been rumoured but until there is an official announcement, the market remains completely in the dark. Unsurprisingly, a deal was not reached on Monday as was hoped and it looks like we may have to wait another few weeks for progress.

The euro has benefited from some remarkably positive eurozone bond auctions of late; the impact of the ECB’s cheap loan offering in evidence once again. Spain in particular saw terrific demand and yields also eased. On the data front, there was a staggeringly strong German economic sentiment survey which contributed to the euro’s best week in months. The IMF joined the party on Wednesday, with reports suggesting that it would be making a further $1 trillion available to the eurozone. This, predictably, was later revised down to “several billion dollars.”

So, there have been some genuine developments for the euro in the past week or so – S&P’s downgrade aside – but beyond the short-term, not enough to sustain further gains or even maintain current levels from our point of view.

Sterling struggling ahead of UK GDP and MPC minutes

Wednesday’s session is an important one as far as sterling is concerned. We will see the preliminary UK GDP figure for the final quarter of 2011, which is expected to show a marginal (0.1%) contraction. The minutes from the MPC’s last meeting a fortnight ago will also be watched closely for clues as to whether the Bank of England’s quantitative easing programme will be stepped up again in early February. Our bet is that it will but downside risks for sterling should be fairly limited on this front, with the market having priced it in to a large extent. The UK GDP figure could well have a material impact on the sterling exchange rates if it undershoots already pessimistic expectations.

UK unemployment numbers reached fresh highs last week and UK inflation declined aggressively, neither of which are positives for the pound. On a brighter note, UK retail sales picked up a little in December, which was to be expected in light of November’s appalling showing.

The euro is trading strongly this morning on the back of some positive manufacturing and services PMI data. There have also been some positive political developments this week; Germany has stated it is open to increasing the firepower of the eurozone bailout fund and there has been progress on details relating to the permanent bailout fund – the European Stability Mechanism (to be introduced later this year). The euro should be able to hang onto most of its recent gains, though further climbs look a push. With GBP/USD at $1.56 and EUR/USD at $1.3050, the dollar looks ripe for a recovery soon. At the end of the week, we are likely to learn the US economy grew impressively in the last quarter of 2011, which should improve the prospects for the US dollar regardless of any boost to risk appetite that it may trigger.

End of week forecast

The euro rose strongly yesterday at the start of the trading week despite evidence to the contrary. It touched a 3 week high against the pound and also went over the significant level of USD$1.30.

The talks in Greece continued all day yesterday. Greece is looking at a ‘haircut’ of up to 70% as part of a debt swap plan on new bonds issued with an interest rate of between 3% and 4%. Greece hopes to reduce its debt from its current level of 160% of GDP to 120% by 2020.

International banks and other private institutions represented by the Institute of International Finance (IIF) declared yesterday after unsuccessful talks over the weekend that they had already offered what they consider to be their “maximum offer that is consistent with the voluntary debt exchange”, but euro zone finance ministers did not sign off on the proposal.

Reports suggest that the major issue at the heart of the disagreement is the fact that the IIF insists on an average 4% interest rate being applied on the new bonds while Greece refuses to pay above 3.5%.

Meanwhile, euro zone finance ministers met yesterday in Brussels and decided to back the Greek government’s stance. The euro group president, Jean-Claude Juncker, agreed that the Greek coupons need to be below 3.5% for the debt to be paid up to 2020 and that it should be below 4% for the full 30 year life of the bonds.

Negotiations over private sector involvement and the “voluntary” 50% haircut have dragged on for months to no avail. Reaching an agreement is a prerequisite for Greece to receive a second financing package from the International Monetary Fund and the European Union. Athens faces up to €14.5 billion in maturing debt in March and without a deal could be forced to enter a disorderly default.

Data published yesterday showed that Spain’s gross domestic product (GDP) for the fourth quarter of 2011 contracted by 0.3% quarter-on-quarter. The Spanish economic expansion continues to slow down after a flat (0.0%) reading for the third quarter and just 0.2% growth in the second quarter.

“During 2011, the modest recovery on which the Spanish economy had embarked a year earlier lost momentum as the euro area sovereign debt crisis spread to a larger number of countries and strains on financial markets heightened,” reported the Bank of Spain.

“On the expenditure side, national demand is estimated to have fallen at a slightly higher rate than in the July-September period (0.5% quarter-on-quarter), while the positive contribution of external demand, at 0.3 pp, was somewhat lower than that in the previous quarter, reflecting the slowdown in export markets in the closing months of the year.”

The Bank of Spain expects a substantial economic contraction in 2012 (-1.5%) and a modest recovery in 2013 (0.2%).

Despite all the uncertainty with Greece and the poor economic data out of Span, the euro continues to rebound from its multi-month lows recently set against the pound and US dollar.

With the equity and commodity markets rebounding strongly worldwide, there is less demand for the US dollar’s safe haven status and consequently, the US dollar has fallen of late. The markets also marked the dollar down ahead of the latest two-day Federal Reserve Rate meeting which starts later on today. The markets will be keeping a close eye for fresh clues on when Fed officials expect interest rates in the world’s largest economies to start to rise. At the end of this week sees the publication of US fourth-quarter GDP data which will also show the strength or otherwise of the economic recovery in the US.

In a signal to the markets that suggests that a third round of the bond buying program known as Quantitative Easing (QE) may be on the cards next month, Bank of England Monetary Policy Committee (MPC) member Adam Posen suggested in a speech last night that the MPC will vote for further asset purchases if new forecasts for growth and inflation support that course of action.

Posen also suggested that should those parts of the economy which did not shed as many workers as would have been expected (such as the financial industry), during the downturn, do so now, then “inflation will be coming down in the next couple of years and unemployment will unfortunately likely rise some over the next couple of years, but not hugely.”

“If that is our forecast,” he added, “the MPC is right to have done quantitative easing to try to get us from having inflation be too low and employment too low in two to three years’ time, and the committee is right to consider, as we will be doing in a few weeks, whether we need to do more.”

The euro opened the trading week at the bottom end of a 15 month trading range against the pound, close to 17 month low against the US dollar and at an 11 year low against the yen following the string of sovereign credit rating downgrades of euro zone countries by credit ratings agency Standard & Poor’s (S&P).

This despite the lower trading volumes from the US public holiday yesterday as US financial markets were closed on Monday for Martin Luther King, Jr. Day.

S&P announced the downgrading of the European Financial Stability Facility, (EFSF) from AAA to AA+ yesterday, sparking concern about the bailout fund’s ability to raise money cheaply.

On Friday, France lost its AAA rating by one notch to AA+ for the first time since 1974. Austria also lost its AAA. Both Spain and Italy were cut by two notches to A from AA- and Portugal’s rating was cut by BBB- to BB. For now, Germany, Holland, Finland, and Luxembourg held on to their AAA ratings.

Greece also remains in the spotlight. Prime Minister Lucas Papademos signalled that leaving the euro is not an option. On the other hand, director Bill Gross of investment management giant PIMCO believes that Greece will default following the latest round of rating cuts and possibly as  soon as in March.

S&P noted that, after also having taken away the highest quality rating from both France and Austria, the EFSF fund is “no longer fully supported by guarantees”.

The agency further explains that “we consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF’s guarantors and securities backing the EFSF’s issues are currently not in place. We have therefore lowered to ‘AA+’ the issuer credit rating of the EFSF, as well as the issue ratings on its long-term debt securities.”

For the moment they classify the current outlook as “developing” as they admit that during the next two years “we may either raise or lower the ratings”.

The future of the outlook will depend on actions taken by the EFSF member states to implement credit enhancements.

With the focus firmly on the euro zone, the pound continues to trade at the upper end of a 15 month trading range despite deteriorating economic data and the suspicion that the Bank of England may be on the verge of agreeing a third round of their bond buying programme known as Quantitative Easing (QE) of up to £50 billion next Month in an effort to avoid the UK going back into recession.

Yesterday, the Ernst & Young ITEM Club, a well-respected economic forecaster reported that in their opinion, the UK is already in a recession and that growth will flat-line this year. Hence, the consultancy has slashed its 2012 gross domestic product growth forecast to just 0.2%, from the 1.5% previously estimated. Economic growth however is expected to recover to 1.75% in 2013.

Professor Peter Spencer, the organisation’s chief economic advisor, said: “Figures for the last quarter of 2011 and the first quarter of this year are likely to show that we are back in recession and we are going to have to wait until this summer before there are any signs of improvement.” He added nonetheless that, “it’s not going to be a repeat of 2009; we are not going to see a serious double dip.”

Even so, the ITEM Club’s assumptions are dependent on the euro zone remaining intact but the latest estimate does emphasise that the uncertainty over Europe is making businesses reluctant to invest.

ITEM Club forecasts that investment fell by 2.6% in 2011 and will grow by just 0.4% in 2012. This, says ITEM, will have a knock-on effect on jobs, with the unemployment rate reaching nearly three million in the first half of 2013, or 9.3% of the UK’s workforce.

Tomorrow see’s the publication of UK unemployment data which should give a further clue as to the state of the UK economy and the likely response from the monetary authorities.

With all the uncertainty, demand for the US dollar’s safe haven status continues unabated allowing the dollar to trade close to a 17 month high against the euro and a 13 month high against the pound.

Each year the Post Office releases an annual holiday money report which looks at the cost of eight specific items in 40 different holiday destinations. The aim of this report is to show which country offers the best value for money. The items compared include the cost of a restaurant 3 course meal for two adults including a bottle of house wine, a cup of coffee, a local beer, a bottle of coke, a 1.5l bottle of mineral water, suncream, insect repellent and cigarettes.

The Post Office Holiday Money report results revealed that Sri Lanka and Spain are the most value for money holiday destinations with prices in Spain now a whopping 40% lower than they were in this country five years ago. Within the report it states that the cost of the eight items was less than £38.00 in Spain whereas in Turkey and Egypt two countries deemed as incredibly cheap the eight items cost £60 in Turkey (17th position) and £70 in Egypt (20th position). Egypt has already suffered from a decline in the number of British holiday makers travelling to the country because of the recent civil unrest. Higher spending costs are likely to reduce the number of tourists further.

Surprisingly Portugal was another value for money destination coming seventh in the Post Office report with the eight items costing a mere £45.

With the Euros recent slump and some phenomenal booking deals available online, holidays within the Eurozone have become far more affordable. The pound has also made recent gains against a number of other currencies including the Hungarian Forint (HUF), the Czech Koruna (CZK) and the Polish Zloty (PLN). This has been beneficial to those travellers planning a weekend city break to Budapest, Prague and Warsaw. The value of the British pound against the Forint and the Zloty has increased by 12%, and 5% against the Koruna in the past year.

Sri Lanka, Mexico, Thailand and South Africa were the cheapest long haul destinations.

Best value for money tourist holiday destination
1. Sri Lanka £27.95
2. Spain £37.72
3. Czech republic £39.72
4. Bulgaria £39.65
5. Mexico £44.03
6. Hungary £45.57
7. Portugal £45.58
8. Thailand £46.15
9. South Africa £47.62
10. Vietnam £50.71
Worst Value for money tourist holiday destinations
1. Australia £115.69
2. Barbados £113.18
3. Singapore £113.03
4. New Zealand £108.29
5. Costa Rica £108.07
6. Canada £107.02
7. China £106.34
8. USA (Miami) £104.55
9. Brazil £92.74
10. Mauritius £91.97

If you are planning a holiday soon make sure that you get the best exchange rate on your holiday money. At Compare Currency we have compiled a comparison table of the UK’s leading travel money providers including the Post Office, Thomas Cook, Travelex and M&S. You can easily compare their exchange rates side by side and find the best travel money deal and order your foreign currency online. Visit the travel money comparison table now.

The euro gained against the pound for the second successive day ahead of today’s interest rate decision from both the Bank of England (BoE) and European Central Bank (ECB).

This despite the less than positive data coming out of the euro zone. Germany reported that its 2011 gross domestic product (GDP) was 3.0% compared to 3.6% reported in 2010. The euro zone’s largest economy  has slowed down from a peak in the first quarter of 2011 when it reached its highest rate of growth since reunification. German GDP fell 0.25% in the fourth quarter of 2011.

Yesterday’s bond auction from Germany showed an increased level of demand for German 5-year bonds as investors continue to find refuge from risk. Things are much, much worse in the euro zone periphery.

German Chancellor Angela Merkel suggested that Germany could add more financing to the European Stability Mechanism (ESM). Merkel said that the country would be prepared to increase its contribution once the European Financial Stability Facility (EFSF) has expired.

Meanwhile in Greece, negotiations between the Greek government and its private sector creditors are not progressing adequately according to a report from Reuters which cites senior European bankers and IMF sources. According to the latter private bondholders are unwilling to make more concessions which could mean that euro zone governments will have to increase their own contribution to the bailout package.

Athens is scrambling to take the necessary austerity measures in an attempt to satisfy IMF and EU requirements in an attempt to be eligible to receive a second bailout package worth €130 billion. The assistance is designed to cut the Greek debt burden from its current level of 160% of GDP to 120% by 2020. Private sector investors (PSI) already agreed to take a voluntary 50% ‘haircut’ on their holdings of Greek debt, but Athens is requesting further concessions to, apparently, no avail. A source from the IMF indicated that if the PSI doesn’t suffice to reduce Greece’s debt then the IMF “may be unwilling to commit more money for Athens”.

In a rare bit of good news for the euro zone, credit ratings agency Fitch suggested that whilst it is considering downgrading up to six euro zone countries in the near future, including Italy and Spain the AAA credit ratings of Germany and France should be safe in 2012.

The BoE and ECB will announce their interest rate decisions later on today. Although no rate changes are expected, any indications of future monetary policy changes will be monitored closely with some analysts suggesting that both the BoE and ECB may embark on a further bout of the bond buying program known as Quantitative Easing (QE) in an effort to stimulate their respective economies. One of the known side effects of QE is that it devalues the pound.

With the markets nervous, demand for the safe haven appeal of the dollar remains high enabling the dollar to move to a 3 month high against the pound and a 16 month high against the euro.

Whilst the outlook for the euro zone remains grim, there is a steady stream of improving economic data from the US. Last night, the US Federal Reserve confirmed that economic conditions in the US had improved towards the end of 2011 with economic activity increased “at a modest to moderate pace”. This is an improvement since the Fed’s last statement in November when it spoke of a “slow” rate of improvement.

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