It has been reported that Germany's retail sales rose with a faster pace in January as compared to earlier months.

Preliminary figures from Destatis showed Tuesday that high pace of the retail sales carried the annual growth to the highest level in four-and-a-half years. The latest rate of increase was the highest since June 2010, when sales had risen 6.0%.

Retail sales grew 2.9% month-on-month in January, which was much faster than December's 0.6% increase.

Economists expected that the sale would increase at a weaker pace of 0.4%. This was the fourth consecutive months when the Germany's retails sale increased.

On an annually basis, retail sales grew for the second straight month in January at faster pace of 5.3%, after a 4.8% growth logged in the prior month. As per sources, economists expected that there will be a growth of only 3.0% in that month.

In addition, European shares rose to seven-years high on Tuesday even performing better than expected Germany retail sales, days before the European Central Bank (ECB) kicks off a trillion-euro bond buying program.

The gains followed a rise in Asia and another record day on the Wall Street. Euro zone government bond yields slightly increased but still remained a record low as investors anticipated the ECB's purchases.

The central bank will finalize the details of its scheme at its meeting on Thursday and may start buying immediately after that.

Merger speculation in the Portuguese banking sector also supported the European market, said experts.

Norbert Wuthe, senior analyst at Bayerische Landesbank, said, "German retail sales got off to a very strong start in the new year on the back of (lower) energy prices and no doubt due to the (hike in) minimum wage".

The dollar index fall 0.1 % to 95.363, having risen as high as 95.516 in Asian trading.