- The euro remained slightly lower against the dollar on Wednesday, as encouraging euro zone private sector data for January offset a report showing a sharp fall in retail sales in the region in December.

EUR/USD dipped 0.05% to 1.3510, holding above the ten-week lows of 1.3476 struck on Monday.

The pair was likely to find support at 1.3476 and resistance at 1.3572.

The euro found support after data showed that the euro zone''s private sector posted its strongest growth in more than two-and-a half years in January.

Markit said the final reading of the euro zone composite output index came in at 52.9 in January, slightly lower than the preliminary estimate for 53.2, but up from 52.1 in December.

The report said the upturn was led by the manufacturing sector, where growth of both total new orders and new export business pushed production output to an almost three-year record.

The euro zone service sector returned to growth, but the pace of expansion remained weak, amid subdued domestic demand, particularly in France and Italy.

A separate report showed that euro zone retail sales fell at the fastest rate since May 2011 in December.

Retail sales were down 1.6% from November Eurostat said and fell 1% on year-over-year basis. Market expectations had been for a 0.5% monthly decline and a 1.5% annual gain.

Sales of food, drink and tobacco fell 1.4%, while sales of non-food products dropped 1.8%.

The poor data added to concerns over the threat of deflation in the region after data last week showing that the annual rate of inflation slowed to 0.7% in January. The report reawakened fears that the European Central Bank may tighten policy to stave off deflation, ahead of its upcoming policy meeting on Thursday.

Elsewhere, the euro was down against the yen, with EUR/JPY down 0.47% to 136.74, not far from Monday’s 11-week lows of 136.21. The euro was higher against the pound, with EUR/GBP rising 0.24% to 0.8300.

Sterling weakened after data on Wednesday showed that activity in the U.K.’s dominant service sector slowed unexpectedly in January, but growth remained solid, indicating that the economic recovery is on track.

The U.K. services PMI for January came in at seven-month low of 58.3, down from 58.8 in December. Analysts had expected the index to tick up to 59.0.

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