Eurozone growth rose at 0.5% in the first quarter

Eurozone gross domestic product rose at a robust 0.5% in the first quarter, prompting the euro to rally against the pound and dollar.

The quarter-on-quarter rise in Q1 growth matched the eurozone's economic performance in the final quarter of 2016, which was up from 0.4% in Q3. Annualised growth in Q1, however, slipped to 1.7% from 1.8%.

Germany and Spain advance

Data from Eurostat confirmed the preliminary "flash" estimate, helped by expansionary performances from the economies of Germany, Spain, Finland and Portugal, among others.

Slowdowns in France and the Netherlands capped growth, however, while Greece's economy moved back into recession.

The data appeared to confirm evidence of a pick up in growth this year. Forward-looking data such as purchasing manager surveys have also indicated robust growth in manufacturing and services.

Neutral ECB expected

The euro climbed strongly as the data indicated to investors the European Central Bank would move further towards a neutral stance on monetary policy in the coming board meetings.

Howard Archer at IHS Markit said: "The move towards a more balanced assessment of the growth outlook – backed up by the healthy first quarter Eurozone GDP performance – suggests the ECB will likely drop the reference to lower interest rates in its forward guidance at its June meeting."

Emmanuel Macron: French and Dutch elections have done much to dispel fears of anti-EU backlash - source: Wikimedia Commons

Political developments

Meanwhile, investors have been encouraged by political developments this year. Britain's vote to exit the European Union last year left many investors concerned about a wave of anti-EU sentiment upsetting Dutch and French elections this year.

Both countries, however, returned EU-friendly candidates.

The euro was dominant among the major currencies, rising 0.7% against the dollar to $1.1053, while climbing 0.8% versus the pound to £0.8576. Against the Japanese yen, the euro was 0.6% higher at Y125.62.