Germany’s PMI Composite index fell sharply to 48.3 from 51.9, signaling an unexpected contraction in private-sector activity for the first time since May 2025. The services sector was hit particularly hard, with the PMI Services gauge dropping to 46.9, its lowest level since 2022, amid rising uncertainty linked to the ongoing conflict in the Middle East. France mirrored this trend, with its PMI Composite falling to 47.6, marking a 14-month low, as consumer spending tightened in response to heightened geopolitical risks.

Despite the downturn in services, manufacturing in both countries remains in growth territory, with France’s manufacturing PMI reaching a nearly four-year high of 52.8. However, analysts caution that this resilience may be short-lived, driven by preemptive purchasing amid fears of shortages and price hikes. The Eurozone’s economic recovery is stalling, complicating the European Central Bank’s policy decisions as rising input-cost inflation may necessitate future interest rate hikes.

Market professionals should note that the EURUSD has extended its decline, reflecting increased geopolitical risk and a shift towards the U.S. dollar as a safe haven. As energy prices remain elevated, the dollar’s strength could persist, impacting currency strategies and broader market sentiment.

Source: xtb.com