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UK service sector grows more than expected in February

UK service sector grows more than expected in February

Service sector activity in the U.K. expanded at the fastest rate since September last month, industry data showed on Tuesday. Confidence also continued to improve, with optimism regarding future activity at a nine-month high. Britain’s services sector grew more strongly than expected in February and at its fastest pace in five months, suggesting the economy may narrowly avoid a triple-dip recession, a survey showed on Tuesday. The sector’s second consecutive month above the 50 line denoting growth contrasted with a surprise contraction in UK manufacturing last month. The country’s construction sector also shrank in February. Those surveys revived fears that Britain’s economy was heading for a third recession in four years after it shrank in the last quarter of 2012.

Meanwhile, the European Central Bank will hold off quick-fire action to help Italy or other euro zone states caught up in its backwash on Thursday but new economic forecasts could open the way to looser policy further ahead. ECB policymakers meet in Frankfurt against the backdrop of political deadlock in Italy, where last week’s inconclusive election had fuelled concerns that the euro zone crisis could roar back to life. Draghi has said fixing the transmission mechanism is the ECB’s top priority – a message that suggests a rate cut would achieve little until the policy works better.

On the FX markets, uncertainties regarding the outcome of the Italian election stalemate saw EUR/USD approach a 3 month low hitting $1.2980 yesterday before pushing back above the $1.3025 level. After losing ground on Friday, GBP/USD has stabilised and has pushed back above the $1.51 level early this morning.

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