LONDON (AFX) - The euro was up in early London trade, still benefiting from yesterday's retail sales result which cast a shadow over the level of indebtness in the US, ahead of the EU summit, dealers said. They added that currencies were lacking a clear trend due to uncertainties about the impact of possible military action against Iraq. The euro's sharp upward response to the release of US retail sales data indicates that the balance of risk favours the upside, said Michael Klawitter at WestLB. "However, ahead of the EU summit in Barcelona, euro bulls are unlikely to gain the upper hand and some further range trading should be the name of the game," he added. Sentiment was further helped by the news of a 0.3 pct rise in the French employment in the fourth quarter. Separately, France's industrial production recorded the strongest month-on-month rise since July 2001 at 0.6 pct, with the 0.9 pct rise in manufacturing production the strongest since July 2000. The European Central Bank monthly bulletin, due at 9.00 am, is expected to reinforce expectations for a gradual economic recovery. "With an overwhelming majority of recent anecdotal economic releases suggesting that a recovery is now well underway, we would expect the ECB to reiterate its more optimistic growth assessment," said CIBC World Markets economist Audrey Childe-Freeman. "The recent question marks regarding the supremacy of the dollar may continue to benefit the euro/dollar and euro/sterling pairs in the near term, while we do not see the slightest fundamental reason to sell euro/yen at this stage," she added. Meanwhile the US dollar was standing at the lower end of its recent trading range, pulled lower by a sell-off in US equities overnight. Observers said that while a military conflict would lead to safe haven flows into the dollar, higher oil prices could undermine the US economic recovery and would increase the US deficit, via a rise in imports. Sterling initially came under pressure, particularly versus the euro, from the announcement by British pension funds that some of its clients should return into the public pension system as its returns may be below expectations.