Signs of weakness in the economy in the fourth quarter, linked to Brexit uncertainty, had prompted speculation the central bank might cut its benchmark interest rate from 0.75% to 0.5%. German services PMI was capped at 52.9 in December that had seen the experts forecasting 53.0 for January. "Output growth was unchanged from the modest pace seen in December, signaling that the economy failed again to record a pick-up in growth momentum", IHS Markit economist Andrew Harker said.
Following Friday's PMI, the euro continued to languish near a seven-week low after the ECB's more dovish tone at Thursday's meeting than some had expected.
The German economy expanded by 0.6% previous year, its weakest growth since 2013, as manufacturers struggled with a slowing world economy and rising uncertainty caused by trade disputes and Britain's planned-but-delayed departure from the European Union.
The euro zone's headline index was bogged down by a still struggling factory industry. The composite index is based on data from IHS Markit's surveys of both services and manufacturing businesses. The figure was capped at a lower 43.7 in December, following which, analysts had anticipated manufacturing PMI to post at 44.5 in January. On the manufacturing front, however, France beat the forecast of 50.6 printing 51.0 for manufacturing PMI in January.
"Business activity expanded for the first time in five months, driven by the sharpest increase in new work since September 2018", IHS Markit said.
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"However, the emerging stabilization in manufacturing should also help the service sector, which has so far been able to decouple itself from the shrinking manufacturing sector".
And possibly of concern to policymakers, demand weakened suggesting there won't be a significant turnaround anytime soon. French services PMI dropped to 51.7 in January from December's 52.4.
But optimism about the year ahead bounced.
"As we write, markets now see just a 43% chance that the MPC will cut Bank Rate on January 30, down from 50% before the PMI was released and a peak of 75% last week", Tombs wrote.