In the UK:

* Although data recorded a drop in UK retail sales of 0.4% in November, they posted a threemonth gain of 0.7%, the strongest such gain since August 2010. Across the day,GBP enjoyed a rally to a high of $1.5529 against the dollar belying the on-going weakness perceived in the British economy.

* While private consumption continues to stall, the BoE will surely see a growing case for expansion of its monetary policy and the minutes of the most recent policy meeting, due out next week, suggest a growing pessimism regarding the economy, expectation for further QE will surely increase.

* Christian Noyer, head of Bank of France, caused a stir by claiming that the UK should have its credit rating cut from the prestigious AAA before France given the relative deficits, debt,inflation and growth.

* GBP/EUR fell from highs of 1.1939 to 1.868 and back before consolidating between 1.1910 and 1.1920 where it seemed to settle throughout US and Asian Tarding

Elsewhere:

* Despite the ECB’S monthly report insisting the eurois still under considerable pressure, Spains treasury sold 6 bn Euro medium and long term bonds, surpassing a target of 3.5 bn Euro while 5 yr bonds were at an average yield of 4.02%, down sharply from 5.27% last month and 10 year bonds boasted a yield of 5.54% compared to 6.97% last month. Importantly, some consider the stark improvement an indication of ECB involvement in the secondary bond market and therefore somewhat artificial.

* SNB announced their decision to maintain a EUR/CHF floor at 1.2000 with ‘utmost determination’. The intention to maintain the peg which was established on September 6 saw the franc rise 1.2% against the Euro to CHF 1.2229 – a six week high.

* This was compounded by the SNB also deciding to keep its key refinancing rate close to zero while Swiss industrial productiondate recorded a greater than expected decline in the third quarter.

* Manufacturing activity across the EuroZone posted a suprise increase for December although the figure, 46.9, is the fourth consecutive month where the published figure has come in at less than 50, wchih shows growth or contraction.

* Consumer price inflation remianed unchanged at an annualised rate of 3%, in line with consensus.

* Further developments to the European crisis resolutions saw Russia commit EUR10B to the IMF but a dent to plans for longer-term refinancing operations came as bankers seem unlikely to buy more sovereign debt using the 3 year loans available from the ECB from next week.

* EFSF have been accused, in some circles, of irresponsibility as the draft prospectus for the lastest bailout instruments cites “Risks arising from a Reference Sovereign ceasing to use the Euro asits lawful currency…or the cessation of the Euro as a lawful currency” as part offour pages of potential risks.

*A short term correction in the major currencies saw the greenback cede gains,which reached as low as $1.2955 against the Euro, as part of a rally which willhingeon Fridays economic docket.

* Data could bolster the dollar with the headline reading for US inflation anticipated match the previous such release. Thursday’s Producer Price inflation datum in the US matched expectation at a 0.3% rise.Such stubborn price growth and a steady increase in economic activity might hinder expectation for theFOMC to undertake another large scale asset purchaae program.

* Thursday’s other date rerleases saw initial jobless claims fall to a three yearlow of 366k, according to the Department Labor, despite predictions of a climb to 390k.The New York and Philly Fed Indices of manufacturing conditionsclimbed to a 9.5, a seven moth high, and 10.3,double the expected figure, respectively.

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