Flash Eurozone PMIs revitalised interest in the Euro

Boosted interest in the Euro emerged after preliminary PMI estimates showed a surprising acceleration in the services sector, which was able to offset the negativity from industrial weakness significantly.

Both France (46.2 to 44.9) and Germany (41.9 to 42.2) saw their manufacturing PMIs fall short of expectations (46.9 and 42.8, respectively). This reinforces the notion that the Eurozone industry, in contraction territory since June 2022, has seen its decline intensify since the beginning of the year. This data could bring the start of the ECB's rate-cut cycle closer.

The services sector, however, paints a contrasting picture. It has been accelerating since the beginning of the year and entered growth territory in March. While France's services sector edged into expansion territory (index at 50.5), Germany marked a significant rise from 50.1 to 53.3. The eurozone-wide services PMI rose from 51.5 to 52.9, its highest level since May 2023.

In our view, the weakness in the Eurozone industries should not be ignored, as it could again be an early signal of a weakening economy, increasing speculation of an imminent rate cut. Short-term, however, the positive surprise from the services sector gives EURUSD a potential rebound towards 1.07 after a 2.5% pullback from 1.0880 to 1.06 earlier this month.