Euro sags as French PMI slumps into contraction, yen holds haven bid

The euro came under pressure on Friday after France's private sector fell back into contraction in October and the wider eurozone PMIs missed forecasts. The yen held its haven gains as worries about artificial intelligence kept investors cautious, with Investing.com summing up the session as "yen rallies, euro sags, dollar shrugs."

Our last recap covered the yen's climb to a five-week high. Friday's new story is in the European data, which split sharply between a weak euro area and a stronger UK.

Eurozone PMIs disappoint

investingLive reports that France's flash composite PMI dropped to 48.4 against 50.5 expected, down from 51.1. Services fell to 48.4 and manufacturing to 49.3. The outlet links the slump to political and financial concerns, with demand falling sharply.

Germany was mixed. According to investingLive, manufacturing beat at 54.2 against 53.5 expected, but services missed at 51.7 and the composite slipped to 52.8 from 53.8.

For the whole bloc, investingLive says the composite came in at 51.9 against 52.7 expected, down from 53.1. Activity is still growing, but the outlet says the slowdown keeps the ECB's rate hike dilemma alive. The ECB also published its September Consumer Expectations Survey on Friday.

On the bond side, Investing.com reports that US Treasury yields are set for a third weekly drop as AI worries fuel a haven bid.

Sterling: strong PMIs, weak shoppers

UK data pulled in two directions. investingLive reports the flash composite PMI rose to 53.1 against 51.8 expected, with business activity growing at its fastest pace since February. Earlier, UK retail sales fell 0.4% in September against a 0.1% drop expected. investingLive says the miss complicates the Bank of England's rate hike outlook.

The pound still slipped. Investing.com attributes the move to a risk-off selloff weighing on currencies.

Dollar, loonie and risk mood

US flash PMIs were close to forecasts. According to investingLive, services came in at 57.9 against 58.0 expected and manufacturing at 56.0 against 55.5. The composite eased to 57.6 from 58.4. Selling prices rose at the sharpest rate since August 2022.

In Canada, August retail sales rose 1.2% against 1.3% expected, investingLive reports, with the September advance estimate at +0.7%. A day earlier, Investing.com said oil prices and BoC rate hike bets were supporting the loonie.

The investingLive European wrap notes that crude extended gains on the Saudi-Houthi conflict and concerns about US-Iran attacks. Gold was caught in market liquidation despite falling real yields. The wrap also says Treasury yields rebounded during the European session.

Reference fixings

The ECB reference rates from 23 October give a snapshot of the morning moves. EUR/USD was fixed at 1.1193, down 0.11% from the 22 October fixing. USD/JPY was fixed at 156.80, down 0.16%, extending the slide we covered alongside a beginner's guide to moving averages on the yen's five-week high. GBP/USD was fixed at 1.3368 (-0.06%) and USD/CAD at 1.3995 (-0.28%). USD/CHF rose 0.28% to 0.8244.

Charts: EUR/USD and USD/JPY.

What to watch next

• Bank of Japan: Investing.com reports that Citi expects USD/JPY to stay range-bound around the BoJ's rate decision.
• Bank of Canada: rate hike bets remain a support for the loonie, per Investing.com.
• ECB and BoE: the PMI miss and the UK retail sales drop leave both hike debates open, according to investingLive.
• Oil and AI risk: Gulf tensions and AI worries continue to drive haven flows and Treasury yields.