The Pound declined against the Euro and made gains against the Dollar on Friday which coincided with U.K. producer prices which declined to the lowest level in five months in October, the Office for National Statistics announced on Friday. Producer inflation eased on lower raw material costs and faltering global demand.

The Dollar declined against the Pound and the Euro on Friday as U.S. consumer confidence advanced to highest level in five months as consumers became more optimistic on the outlook of the country’s economy, said the Thomson Reuters/University of Michigan on Friday. An index of sentiment rose to 64.2 points in November from 60.9 points in October.

The Euro made gains against the Pound and the Dollar as Italy’s Senate passed austerity measures to reduce the budget deficit on Friday in an effort to restore investor confidence and clear the way for a new interim government that may be headed by Mario Monti, a former European Union Competition Commissioner.

Europe is likely to dominate the headlines once again this week as traders watch political developments in Italy and Greece. The expectation is that national governments will be fully operational in both countries over the coming days so markets will be looking for progress on fiscal initiatives and economic reforms. There are new PMs in place in both countries now, with the Italian lower house of parliament giving its final approval to a package of economic measures over the weekend.

Markets will also be watching to see if the ECB continues to support the Italian bond market. The ECB also holds its monthly non-policy meeting on Thursday. This normally confines itself to the discussion of technical issues but in light of the current uncertain environment and downside risks to growth it is probably worth watching, particularly after last Friday’s comments from the ECB’s Nowotny about “more decisive ECB action potentially ahead”.

Data released 14.11.11

EU      10.00 Industrial Production (September)