Euro back to 11-year low on disappointing services sector growth

The euro has been pushed back to the 11-year low it hit in January following disappointing services sector growth.

The EUR/USD fell 0.53% on the day on 4 March to a low of 1.1115 as services PMI figures for Spain, Germany, Italy, France and the eurozone were released by Markit. The level almost matched the 11-year low of 1.1097 touched on 26 January.

The Spanish services PMI decreased to 56.2 from 56.7 in January while analysts had been expecting a repeat. Italy's fell to 50.0 from 51.2 when the market consensus was for an increase to 51.4.

French and German numbers increased in February but came in less than expected. The French PMI rose to 53.4 from 49.3 while the German index jumped to 54.7 from 54.0, compared to a consensus of 53.4 and 55.5 respectively.

For the region as a whole, the Markit services index rose to 53.7 from 52.7 trailing a market forecast of 53.9. The composite index too fell behind expectations of 53.5 by coming at 53.3 from January's 52.6.

So far this week, the euro has dropped 0.67% adding to the 1.8% loss in the previous two weeks.

However, impressed by the index holding in the expansion area of above 50 readings for most eurozone countries, analysts at Markit are predicting improved growth prospects for the region in the first quarter of 2015.

"There were clear signs of the eurozone economy reviving in February, with stronger inflows of new business and rising business confidence suggesting growth should continue to pick up in March," said Chris Williamson, chief economist at Markit.

Williams has predicted a 0.3% GDP growth for the eurozone in the March quarter with Ireland leading at 1% followed by Spain at 0.7%; Germany is likely to post a moderate growth rate of 0.3%. Italy's was seen at 0.2% and France's at 0.1%.

"Concerns about 'Grexit' and contagion to other countries have eased, the weaker euro should help boost exports and, perhaps most importantly, the commencement of quantitative easing by the ECB should stimulate the economy as we move through the year."