British annual consumer price inflation will likely jump to more than 3% in January due to temporary factors, but will fall back below the 2% target over the two-year target period, the Bank of England said in its latest quarterly inflation report on Wednesday.

The dollar weakened against 13 of the 16 most traded currencies as investor aversion to risk eased amid expectations of steady global economic growth.

Ahead of the British elections that must take place by June; the Labor government on Wednesday has declared its agenda addressing top economic issues.

The two largest economies in Europe released their third quarter GDP growth. Germany’s economy grew 0.7% in the period that ended September 30 and France announced a 0.3% improvement. In the second quarter, both countries had reported a tiny up-tick in GDP.

The Bank of England on Wednesday boosted its forecasts for growth and inflation but still sees subdued price pressures and a slow recovery as the economy limps out of its deepest recession in decades.

The major highlight for today in Europe is the minutes released by the Bank of England, since it determines how the vote was split regarding the central bank leaving interest rates steady since their last cut in March and how many members are with the APF program.

Bank of England Governor Mervyn King said Tuesday that the British economy will likely return to growth in the second half of this year, but warned that gains would be modest and that the path to a sustained recovery is far from clear.

Most economists and analysts believe that Bank of England will hold the interest rate at its all-time low level of 0.5%. They also expect no change in the £175bn limit on new money pumped into the economy through the quantitative easing program.

The dollar reached a two-week high versus the euro after an unexpected drop in U.S. consumer confidence this month. The U.S. consumer is the prominent component of the global recovery.

The Federal Reserve, European Central Bank, Bank of England, Bank of Japan, and Swiss National Bank today announced they will extend their liquidity-providing facilities and operations through January 2010. The common currency was partially dragged lower by comments from Bank of England Governor King who said the weaker sterling has been “helpful” in reducing economic and financial imbalances.