The euro rose to a two-week high against the dollar on Friday after a survey suggested growth in the eurozone service sector was stronger than expected.

The eurozone services purchasing managers’ index rose from 50.6 last month to 52.3 in February, beating consensus forecasts for a reading of 50.7.

Analysts said the news dampened expectations that the European Central Bank would cut interest rates in the near term.

“The data provide a welcome sign that the eurozone economy may not be slowing as dramatically as has been feared,” said Ben May at Capital Economics.

However he said the data also suggested that slowing activity might be bearing down on inflation.

“With tentative signs emerging that slowing activity is bearing down on pricing pressures, we still think that the ECB will be cutting interest rates by the middle of the year.”

The euro rose 0.2 per cent to $1.4840 against the dollar, but was little changed at Y158.90 against the yen and £0.7540 against the pound.

Meanwhile, the dollar lost ground amid heightened concerns over the prospects for growth in the US.

Analysts said Thursday’s surprise fall in the Philly Fed’s manufacturing index had stoked expectations that the Federal Reserve would move to cut US interest rates further.

Derek Halpenny at Bank of Tokyo-Mitsubishi said the drop in the Philly Fed was another indicator in a long list to suggest a US recession was imminent.

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