France’s HCOB Services PMI rose to 49.6 in February, beating expectations of 49.
A reading below 50 signals a contraction in activity, and February remained under that level.
Services Slowdown Shows Resilience
France’s services sector is still shrinking, but the downturn is easing more than expected. This upside surprise points to some resilience in the Eurozone’s second-largest economy. In the near term, it could provide modest support for the CAC 40 and the Euro.
Most of 2025 was marked by ongoing weakness in services, with the PMI often below 48. Today’s 49.6 reading is still below the 50 level that signals growth, but it is a clear improvement from those lows. The direction is improving, even if the sector has not returned to expansion.
This also complicates the outlook for the European Central Bank. Eurozone core inflation was last reported at 2.4% in January, and signs of stabilization reduce the pressure for an immediate rate cut. As a result, traders may trim expectations for a second-quarter cut, which could push short-term yields slightly higher.
For equity-derivatives traders, the takeaway is mixed. A steadier economy helps sentiment, but ongoing contraction in services can still limit earnings expectations. This gap between better-than-feared data and continued weakness may keep implied volatility in CAC 40 options elevated in the weeks ahead.
Euro Support And Policy Divergence
France’s relative strength could support the Euro, especially versus currencies tied to weakening growth. Recent US retail sales for January 2026 were weaker than expected, raising speculation that the Federal Reserve could move before the ECB. If policy paths diverge further, EUR/USD call options may become a more attractive way to express a bullish Euro view.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
