Private sector output in Germany expanded at the fastest pace in more than six-years in December, fueling optimism over the health of the euro zone's largest economy, preliminary data showed on Thursday.. The preliminary German manufacturing purchasing managers’ index climbed to a record-high of 63.3 from a final reading of 62.5 in November. Analysts had expected the index to slip to 62.2 this month. The flash services purchasing managers’ index rose to a 24-month peak of 55.8 from 54.3 in November, above expectations for a reading of 54.7.

However, the focus of the session was on ECB interest rate decision and the following press conference. ECB left it monetary policy and its forward guidance unchanged from its last meeting. Then it announced that its asset purchases would be halved starting in January to 30 bln euros a month through September 2018.  The ECB reiterated that official rates will be remain at their present level well past the end of the net asset purchases.  It indicated that QE would continue until the end of September, but will "run until the inflation path is sustainably adjusted.  The ECB sees domestic generated price pressures as continuing to be "muted." This means ta sustained uptrend in price trend remains elusive.

The ECB's staff forecast raised growth forecasts "substantially" and made minor adjustments to its inflation projections. Turning to growth first, the staff raised this year's GDP forecast to 2.4% from 2.2%, and next year's growth was raised to 2.3% from 1.8%. The GDP forecast for 2019 was raised to 1.9% from 1.7%, and for the first time, introduced a 2020 GDP forecast of 1.7%. The forecast suggests growth momentum is peaking or will peak shortly. The minor adjustments mean that this year's inflation forecast was unchanged at 1.5%, while raising next year's projection to 1.4% from 1.2%.  The 2019 forecast was left unchanged at 1.5% and the 2020 forecast, introduced for the first time at 1.7%.

In the US session Retail Sales and Unemployment Claims data was released. U.S. retail sales increased more than expected in November as the holiday shopping season got off to a brisk start, pointing to sustained strength in the economy that could pave the way for further Federal Reserve interest rate hikes next year. The Commerce Department said retail sales rose 0.8 percent last month, with households buying a range of goods even as they cut back on purchases of motor vehicles. Data for October was revised to show sales gaining 0.5 percent instead of the previously reported 0.2 percent increase.

Separate report on Unemployment Claims showed that in the week ending December 9, the advance figure for seasonally adjusted initial claims was 225,000, a decrease of 11,000 from the previous week's unrevised level of 236,000. The 4-week moving average was 234,750, a decrease of 6,750 from the previous week's unrevised average of 241,500.

There will be no major data releases from Eurozone tomorrow. In the US session Industrial Production figures will be published. Analysts predict 0.3% increase.

Figures to watch:

Industrial Production (Friday 15:15)