Eurozone Services Data Fuels Hope Of A Year End Recovery

The euro slipped modestly on Tuesday morning but remained above $1.32. The common currency has been trading steadily as the more and more data points to the end of the bloc's record long recession. On Monday,

reported that Markit Economics issued a report which showed that eurozone services output shrank in July, but at a slower pace than initially expected. The report showed the region's index of activity rose to 49.8 compared to 48.3 in June. The reading barely missed the 50 point mark, which is the lowest score that indicates expansion. In the manufacturing sector, the region returned to growth, beating expectations after contracting for two straight years.

The positive data added fuel to hopes that he region's GDP could finally grow in the second half of the year. Although many are optimistic about the eurozone's recovery, even those who expect to see the region expand in the second half of the year admit that any growth will be modest at best. With record high unemployment and social and political uncertainty in several bailout countries, the region's domestic demand is expected to remain depressed in the near future. Retail sales data for June confirmed this sentiment as the figures fell and highlighted the lack of household spending within the region. Moving forward, the bloc's recovery will be largely dependent on low interest rates and exports. This formula is a dangerous one, though, as the global economy is only modestly improving. The current slowdown in China could be a major factor preventing the eurozone from a solid recovery.