France’s HCOB Composite PMI for January recorded a figure of 48.6, falling short of the expected 50.1. This indicates a contraction in economic activity as it is below the 50 benchmark, which separates expansion from contraction.
The currency pairs displayed varied fluctuations in response to economic data and rumours. The GBP/USD climbed above 1.3500, motivated by positive UK retail sales and PMI data. Meanwhile, USD/JPY remained near 158.00, amidst speculations of intervention, while EUR/USD rested below 1.1750 ahead of US PMI data releases.
Commodities experienced modest shifts with the silver price halted below the $100 psychological barrier. In the cryptocurrency sphere, Bitcoin showed slight recovery signs, whereas Ethereum and Ripple maintained downward pressure. Gold retracted from peak levels but remained stable above $4,900.
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The latest French Composite PMI data for January has come in well below expectations, signaling an economic contraction when we were looking for slight growth. This poor showing from the Eurozone’s second-largest economy raises concerns about wider weakness across the entire bloc. It suggests that the cautious optimism from late last year might have been premature.
This new data puts immediate downward pressure on the EUR/USD pair, making bearish positions more attractive. We should consider buying put options on the EUR/USD, as this weak PMI reinforces the view that the European Central Bank may need to act. With Eurozone inflation already having cooled to 2.5% in the final readings for 2025, the case for holding rates high is weakening significantly.
The economic picture in France contrasts sharply with recent strength seen in the UK, where data has been more robust. This growing divergence makes shorting the EUR/GBP cross, either through futures or options, a compelling strategy for the coming weeks. The surprise 1.2% jump in UK retail sales we saw back in December 2025 had already highlighted this trend, which today’s data only confirms.
We should anticipate that volatility in Euro-related pairs will increase as the market digests this information. This PMI miss is a significant event, reminding us of the similar downturn in sentiment we witnessed in the third quarter of 2025. During that period, a series of weak data points caused the Euro to fall sharply against the dollar over the course of a month.
