The latest data from HCOB, released on 21 August 2025, shows France’s flash services PMI at 49.7, slightly better than the expected 48.5. The manufacturing PMI is at 49.9, surpassing the predicted 48.0, and the composite PMI stands at 49.8 against an anticipated 48.5. These numbers mark 12-month highs for services and composite readings, and a 3-month high for manufacturing. Despite these improvements, demand is still weak. New orders have dropped for the fifteenth month in a row, though this decline has slowed to the smallest rate in a year. Employment levels increased for the first time since last November. Even though the Composite PMI is still below the growth threshold, both the manufacturing and services sectors have seen less severe downturns, which offers a glimmer of hope.

Challenges in the Services Sector

The services sector is struggling, with few chances for quick recovery due to falling foreign demand. Although prices are stable, rising input costs could squeeze profit margins. The manufacturing sector faces issues from decreased competitiveness and protective policies. Changes in global supply chains may be causing longer delivery times, and while there wasn’t a repeat of a sharp drop in orders in August, producer sentiment remains low, as shown by a declining Future Output Index. The recent French PMI data exceeds expectations, indicating that the economy may be stabilizing after a long stretch of weakness. This brings some relief, especially following a small GDP contraction of 0.1% in the second quarter of 2025. However, with the European Central Bank keeping rates steady since their last meeting in July, any potential rally from this news may be limited, as overall growth is still fragile. For traders focused on the CAC 40 index, which is around the 8,200 mark, this report doesn’t hint at a big breakout soon. It’s worth considering selling out-of-the-money call options or using bear call spreads, as significant increases seem unlikely due to the ongoing weakness in new orders. This strategy lets us earn premiums while recognizing that the economy is stabilizing, not yet speeding up.

Market Strategies and Uncertainty

The mixed signals in the report—improving employment alongside a falling Future Output Index—indicate that uncertainty remains high. Reflecting on the volatility spikes from late 2024, it’s smart to keep some downside protection. Buying affordable, out-of-the-money puts on the broader Euro Stoxx 50 index could be a sensible hedge against unexpected negative developments. In currency markets, this French data might temporarily support the Euro, but the overall sluggishness of the European economy remains unchanged. With Eurozone inflation at a persistent 2.8% in July 2025, the ECB has limited ability to stimulate growth, likely keeping the EUR/USD pair within a tight range. Strategies that profit from low volatility, like short strangles, could be useful in this setting. Create your live VT Markets account and start trading now.

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