Investing.com - The euro to the lowest level in three weeks against the dollar on Monday after data showing that euro zone private sector activity slowed in February underlined expectations for more easing by the European Central Bank.
EUR/USD hit lows of 1.1056, the lowest level since February 3 and was last at 1.1065, down 0.6% for the day.
The Markit euro zone composite purchasing managers’ index, which measures both the manufacturing and service sectors, dropped to a 13-month low of 52.7 in February from January’s 53.6.
Economists had forecast a reading of 53.3.
Manufacturing output showed the smallest increase since December 2014, moving closer to stagnation amid a further faltering in growth of new orders and exports.
Services fared better, though nevertheless saw growth weaken to the slowest since January of last year.
Growth in Germany's private sector slowed for the second month running in February, while activity in the French private sector fell into contraction territory for the first time in more than a year.
“Disappointing PMI survey data for February greatly increase the odds of more aggressive stimulus from the ECB in March,” Chris Williamson, chief economist at Markit said.
“Not only did the survey indicate the weakest pace of economic growth for just over a year, but deflationary forces intensified.
"Economic growth is likely to slow below 0.3% in the first quarter unless we see a sudden uplift in March, which on the basis of the forward-looking components of the PMI seems unlikely.”
The single currency edged lower against the yen, with EUR/JPY dipping 0.14% to 125.19.
The euro remained stronger against the broadly weaker pound, but was off early highs.
EUR/GBP was last at 0.7806, up 1.02% after rising as high as 0.7836 ahead of the data.
Sterling came under heavy selling pressure following London Mayor Boris Johnson’s shock decision to back a campaign for Britain to exit the European Union.
The move is being seen as a significant blow to Prime Minister David Cameron’s campaign for Britain to remain in the EU.
Meanwhile, the dollar extended gains against the other major currencies as gains in oil prices and equities bolstered risk appetite.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.64% at 97.24.
Demand for the dollar continued to be underpinned after data on Friday showing that U.S. core inflation rose at the fastest rate in four years in January underlined expectations for further interest rates hikes by the Federal Reserve this year.