Eurozone Growth Beats Market Expectations
Eurozone Composite PMI Surprises with Strong October Expansion
Private sector business activity in the Eurozone expanded at a faster-than-expected pace in October. According to data from Hamburg Commercial Bank (HCOB), the Composite Purchasing Managers’ Index (PMI) rose to 52.2, beating forecasts of 51.0 and improving from 51.2 in September.
The Services PMI jumped to 52.6, well above the estimate of 51.1 and the previous reading of 51.3. Meanwhile, manufacturing activity returned to expansion territory after contracting in September. The Manufacturing PMI printed at 50.0, exceeding expectations of 49.5 and the prior 49.8. A reading below 50.0 typically signals contraction.
Dr. Cyrus de la Rubia, Chief Economist at HCOB, commented: “France is increasingly becoming a drag on the Eurozone economy. While the economic situation in Germany brightened significantly in October, the rate of contraction has accelerated for two consecutive months in France. As a result, economic growth in the Eurozone, even though accelerating a bit, has been much weaker than it otherwise could have been.”
He added: “Uncertainty about whether the current government under Sebastien Lecornu can remain in power for much longer—given the disputes over the 2026 budget—is causing unease and contributing significantly to the weak economic situation in France. As a major buyer of goods and services from other Eurozone countries, France’s weakness adds to the fragility of the recovery across the region.”
According to flash estimates published at 07:43 GMT, Germany’s Composite PMI rose sharply to 53.8 in October, up from 52.0 in September. While economists had anticipated a rebound in business activity, the pace of growth exceeded expectations.
Germany’s Services PMI surged to 54.5, compared to the previous 51.5. However, the Manufacturing PMI remained below the 50.0 threshold, printing at 49.6—slightly above forecasts and the prior 49.5.
Dr. de la Rubia noted: “This is an unexpectedly good start to the final quarter. Activity in the service sector has increased significantly, and manufacturing output has risen for the eighth consecutive month. This means that the economy as a whole is also showing accelerated growth.”
He continued: “It is encouraging to see that new orders in the manufacturing sector have risen again slightly after a dip in the previous month. New business in the service sector has even received a real boost. These are good conditions for growth in Q4. However, the fact that the outlook for the future is more cautious than in the previous month—both among service providers and in industry—shows that the economic situation remains fragile.”
At the time of writing, EUR/USD remains broadly stable near 1.1620, showing limited reaction to the Eurozone data. However, following the release of stronger-than-expected German PMI figures, the pair attracted significant bids and climbed toward 1.1630. Investors now await the official Eurozone PMI release at 08:00 GMT.
Flash PMI data for Germany and the Eurozone for October is scheduled for release today at 07:30 and 08:00 GMT, respectively. Among Eurozone economies, Germany’s and the composite Eurozone PMI reports carry greater weight in terms of market impact.
Forecasts suggest Germany’s Composite PMI may have declined to 51.6 from 52.0 in September. Moderate growth in services and continued contraction in manufacturing are expected to weigh on overall business activity. The Services PMI is projected to fall to 51.0 from 51.5, while Manufacturing PMI is expected to remain subdued at 49.5.
For the Eurozone, the Composite PMI is forecast to drop to 51.0 from 51.2. Services PMI is expected to edge up to 51.1, while Manufacturing PMI is seen declining more sharply to 49.5.
EUR/USD is currently trading within a symmetrical triangle pattern, indicating indecision among market participants. The upper boundary of the triangle is drawn from the September 17 high near 1.1920, while the lower boundary connects the August low near 1.1390.
The pair has hovered around the 20-day Exponential Moving Average (EMA) in recent weeks, reflecting a lack of directional momentum. The 14-day Relative Strength Index (RSI) remains range-bound between 40 and 60, suggesting volatility contraction.
If EUR/USD breaks above the October 17 high of 1.1728, it could revisit the four-year high near 1.1920. On the downside, a break below the October 9 low of 1.1542 would expose the psychological support level at 1.1400.