The Pound made small gains against the Euro while declining against the Dollar on Friday as concerns about a fragile UK economy weighed on sentiment.

The GFK NOP survey of consumer confidence fell 8 points in January to -29, the biggest drop since 1992 and the lowest reading in 22 months, hit by a rise in value-added tax and looming public spending cuts.

The Dollar made gains against the Pound and the Euro on Friday following the decent Q4 GDP data released. The number fell short of economists’ expectation for an increase to 3.5% over Q3’s 2.6% .

The reading came in at 3.2% which is still a favourable number for the USD, lending support for the bourgeoning US economic recovery. Though growth was less than expected, the data showed the biggest gain in consumer spending in more than four years with strong exports offering signals that a sustainable recovery is under way. Analysts expect higher interest rates in other countries will keep the dollar on its downward trend, but some argue geopolitical tensions may offer support for the USD if political uncertainty in North Africa triggers risk aversion.

The Euro declined against the Pound and the Dollar on Friday as the single currency pared recent gains following Fridays US data release. This pause in the Euros rise may be short-lived as inflation concerns still support interest rate increases out of the Euro zone, further highlighting a policy divergence with the United States.

Additional comments from French President Sarkozy underpinned the euro, in light of Euro zone debt concerns. Sarkozy defended the euro against sceptics at the World Economic Forum in Davos, saying he and Merkel would never let the currency fail.

Data released 28.01.2011

EU      10.00 Flash HICP (January) (+2.2%) (+2.3%)

UK      11.00 Land Registry House Prices (December) (+2.2%)

US      13.30 Personal Income (December) +0.3% +0.3%

Consumption +0.4% +0.5%

US      13.30 Core PCE (December) +0.1% (+0.8%) +0.1%

US      14.45 Chicago PMI (January)