LONDON, Feb 22 (Reuters) - The euro hit a two-week high versus the dollar on Friday as stronger than expected euro zone service sector data contrasted with regional U.S. factory activity putting on its weakest show since the last recession.
The euro zone services PMI rose to 52.3 in February from 50.6 the previous month, moving away from the 50 watermark between contraction and growth and further dampening expectations of near-term interest rate cuts.
That was in stark contrast to Thursday's Philadelphia Fed's business index which fell to minus 24 in February, showing the deepest contraction in activity since 2001 and much worse than forecasts for minus 11. [ID:nN21572086]
U.S. markets are now fully pricing in a 50 basis point cut at the Federal Reserve's next meeting in March to 2.50 percent and factor in a small chance of an even bigger 75 basis points.
That would add to an unusually aggressive 125 basis points of cuts in January as the Fed tries to fend off a recession in the world's biggest economy. FEDWATCH
"It is a weak dollar story more than anything else. As you saw yesterday the Philly Fed was really what hurt the dollar," said Niels Christensen, FX strategist at Nordea in Copenhagen.
The euro rose to a two-week high of $1.4850
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