U.S. economy boosted European stocks and supported the euro on Friday

"There's no doubt that events in the euro area in the first quarter ofnext year... have the potential to have a profound impact across theglobe," said ChrisScicluna, an economist at Daiwa Capital Markets.
The single currency edged up 0.1 percent to $1.3065, holding above a recent11-month low of $1.2945, although it remains down around 2.1 percent on theyear.
"The dollar is still seen as a funding currency when risk appetiteimproves and people will sell dollars on the back of that," said ChrisWalker, currency strategist at UBS.
"But we still see uncertainties in the euro zone outweighing and look fora move towards $1.25 in the next few months," he added.

The United States reported the lowest level of weekly jobless claims sinceApril 2008 on Thursday, as well as a rise in the Thomson Reuters/University ofMichigan's consumer sentimentindex.
"This improved set of data we've had through Q4 in the U.S. is at leastsomething to be encouraged about," said Daiwa's Scicluna.
MSCI's world equity index gained around 0.3 percent since the data waspublished <.MIWD00000PUS>, but remains on track for a fall of about 12percent in 2011.
The pan-European FTSEurofirst 300 index gained around 0.5 percent.
ECB FUNDSSOOTHE
The European Central Bank's mid-week provision of 490 billion euros of cheaplonger-term cash to over 500 of the region's banks - the largest ever amount ofliquidity pumped into the financial system - is expected to support debtmarkets.
The loans are expected to ease the impact of a wave of capital outflows ofU.S. money market funds from European banks that has gummed up the interbankmarket, and should also support bank shares.
Outgoing ECB executive board member Lorenzo Bini Smaghi also suggested in commentsin the Financial Times on Friday that the ECB could give in and adopt"quantitative easing" to boost the euro zone economy if deflationrisks emerge across the 17-country region.
His comments are the strongest indication yet that the central bank couldexpand its policy tools to prevent a possibly disastrous economic slump incontinental Europe, although BiniSmaghi himself steps down at the end of December.
Meanwhile, fellow ECB Executive Board member Juergen Stark, who also stepsdown at the end of the month, was quoted as saying that Europe should not usethe International Monetary Fund to get around the ban on central banksfinancing governments and those current plans might breach that principle.
"Practically, I don't see any countries other than euro zone statesthat want access to the money. It is an attempt to circumvent the ban on directmonetary financing in Europe," Stark told German daily Die Welt in aninterview.
Yields on Italian 10-year bonds were 4 basis points higher at 6.97 percent,back within a whisker of the 7 percent mark seen as unsustainable high over thelong-term, with the Spanish equivalent little changed at 5.42 percent.
Unsurprisingly, in 2011 Italian bonds <.QW4AP> have been one of theworst performers, posting losses of 5.65 percent overall with longer-datedpaper losing almost 11 percent <.QW4U>.
The rosier picture painted by the U.S. data is also supporting commodities,with copper, which is sensitive to expectations of industrial demand, rising1.0 percent to $7,615 a tonne, on course for its first weekly gain in threeweeks.