Services are dragging the Eurozone PMI down

Alexander Kuptsikevich FxPro

Preliminary Eurozone business activity estimates moved into contractionary territory due to a sharp dip in the services sector.

The Euro-region manufacturing PMI rose to 49.4, the highest reading since August 2022, but still in contractionary territory as it is below 50. The index shows that the sector has been gaining momentum since last December, which can easily be linked to expectations of lavish spending by the new German government and potential repetition by other countries.

Interestingly, the strengthening euro is still not hurting manufacturers. We think it is a fallacy to think that eurozone manufacturers are sensitive to such 10% exchange rate fluctuations. Our observations suggest the opposite: the appreciation of the exchange rate does not hurt the economy, lowering energy costs and generally boosting demand.

The services sector, on the other hand, is not doing so well. The index has fallen back to 48.5, its lowest level since January 2024, and has been drifting downwards all this time. With this setback, the composite index went into contraction territory, below 50. The service sector and the general state of the economy were worse than economists' expectations, pulling the Euro.

EUR/USD pulled back to 1.1300, losing about a third of a cent from intraday highs before publication. The same area worked as strong resistance, and the latest data favoured the bears in the pair.

Author

Alexander Kuptsikevich

FxPro

Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.