The euro had a choppy session as the markets responded to news late on Friday that Greece and its eurozone creditors had agreed a four-month extension to Athens’ financial rescue.
The deal — which still left several important issues unresolved — followed a week of fruitless negotiations on the bailout, although the single currency nevertheless displayed resilience against its peers..
The euro initially fell 0.8 per cent against the dollar on Friday to $1.1279 but news of the agreement triggered a strong rally — although that subsequently faded. In late New York trade, the currency was 0.1 per cent higher at $1.1375, but off a peak of $1.1428.
Over the week the euro was down 0.1 per cent — its first weekly loss against the US currency after three weeks of gains against the US currency.
A stronger than expected revival of the eurozone services sector, as measured by surveys of the purchasing managers, may have helped support the euro.
Although growth in manufacturing remained slow, an acceleration in the services sector helped push the composite PMI up to 53.5 in February, from 52.6 the previous month.
“The external environment continues to be characterised by sluggish global trade but it is becoming increasingly clear that the eurozone economy is already benefiting from substantially lower oil prices and euro depreciation,” said Edoardo Campanella at UniCredit.
Others agreed, adding that in the coming months the impact of the European Central Bank’s €60bn-a-month bond purchases would have a positive impact on growth. Lee Hardman at Bank of Tokyo Mitsubishi warned that improving cyclical momentum in the bloc would not offer much support for the euro while the ECB was so committed to aggressive monetary easing.
Sterling lost just 0.1 per cent against the dollar over the five days to $1.5378, and climbed 0.2 per cent to £0.7386 versus the euro after stronger than expected labour market data. The UK unemployment rate fell to 5.7 per cent in the quarter to the end of December, as average weekly earnings growth rose to 2.1 per cent.
Analysts were split on what the data meant for the timing of any move on interest rates by the Bank of England. Minutes from the rate-setting committee helped little. All nine members voted for no change at the meeting, but while two thought a rate increase may be needed later this year, one member thought it equally likely further easing may be warranted.
Dovish minutes from the Federal Reserve’s policy meeting had little impact on the dollar. The dollar index climbed 0.2 per cent over the week to 94.39.
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