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EUR/USD strengthens on positive Eurozone data

Two pieces of better-than-expected data for the Eurozone have allowed the common currency to gain today.

Services PMI for the 17-nation currency bloc was initially recorded as falling to 47.3 from 48.6 in January, but Markit Economics has since released an upwardly revised figure of 47.9.

Although the services sector posted contraction at the beginning of this year, the fact that it shrank by less-than-predicted is a positive sign for the region, particularly in light of all the upheaval triggered by last week’s inconclusive Italian election.

The Markit report stated: ‘the rate of decline remained less severe than seen in any of the nine months prior to January, and the average contraction seen over the first quarter so far has been the smallest since the first quarter of last year’.

Markit’s chief economist Chris Williamson also commented: ‘the [Eurozone] still looks set to see a much smaller drop in GDP in the first quarter compared to the 0.6% decline seen in the final quarter of last year, with the PMI so far consistent with a 0.2% GDP decline.’

After this positive result the Euro rose by 0.4 per cent against the US Dollar.

Shortly afterwards retail sales data for the currency bloc was released, and it too exceeded the expectations of economists. According to Eurostat retail sales were up by 1.2 per cent in January, not the 0.2 per cent predicted.

Year on year, January’s retail sales fell an annualised 1.3 per cent, 1.6 per cent less than forecast.

Investors will now be looking ahead to tomorrow’s Eurozone GDP figures. If they disappoint the Euro could pare today’s gains.