France’s manufacturing bounce may prove short-lived
At a Glance
ING Economics argues that France's manufacturing PMI bounce is temporary, citing weak new orders and persistent supply constraints. The data likely won't alter the ECB's dovish stance, keeping EUR/USD under pressure. Consensus sees euro downside, with a 1.04-1.12 range into 2026.
Key Takeaways
Full Analysis
What the desk is arguing
Per the full note from ING Economics, the recent uptick in France's manufacturing PMI is a rebound from a low base rather than a sustainable recovery. The headline improvement masks deteriorating demand, with new orders contracting at a faster pace in the latest print.
ING flags that the composite PMI remains in contraction territory, and output growth is not translating into broader economic momentum. The desk expects the ECB to maintain its accommodative bias, which should keep the euro under pressure against the dollar.
Where it sits in our coverage
Our internal consensus targets EUR/USD at 1.075 by December 2026, with a range of 1.04 to 1.12. JPMorgan forecasts 1.10 (Mar26), while Bank of America sees 1.04 (Mar26). Goldman Sachs is at 1.09 (Jun26).
ING's view aligns with the bearish end of the consensus, sitting near the lower bound of the spread. The desk's focus on short-lived manufacturing support reinforces the cautious tone prevailing among most firms.
How other firms see it
JPMorgan and Goldman Sachs share a similar cautiously bearish view on the euro, though with higher targets. Bank of America is more outright bearish, expecting deeper EUR/USD downside.
Related pairs: EUR/USD trajectory remains tied to ECB policy divergence with the Fed; watch EUR/GBP for spillover as UK data provides a competing narrative.
What the calendar says
No high-impact events in the next 30 days for the eurozone or France, so the data-dependent ECB is unlikely to shift guidance before the September meeting. Market focus will remain on US economic releases and Fed rhetoric.
Market Implications
Watch EUR/USD for a break below the 1.07 support as manufacturing data disappoints. The next catalyst is the ECB meeting in September; until then, rate differentials favor dollar longs.
From the original
https://think.ing.com/snaps/frances-manufacturing-bounce-may-prove-short-lived/
Related speeches
4 itemsFrench GDP at risk of contraction
The desk perceives a heightened risk of contraction in the French economy due to declining PMI indices that signal an impending slowdown. Per the full note from ing-think, these indices suggest that the outlook for Q2 is increasingly bleak, compelling traders to reassess their positions in EUR-based pairs. With no high-impact events on the horizon, current economic indicators may dominate market sentiment and volatility. The alignment of this leverage with broader market consensus towards French economic performance creates a crucial pivot point for traders.
France’s industrial momentum is fading
The French economy is showing signs of losing industrial momentum as manufacturing output declines, suggesting that growth may not be as robust as previously thought. Per the full note from ing-think, manufacturing output fell by 1.0% in May, marking a concerning shift given that this sector has traditionally been a growth engine. As the automotive industry struggles with a 4.7% month-on-month decline, this deterioration could weigh on investor sentiment towards the euro. Without high-impact calendar events in the immediate future, traders should be cautious about holding long positions in EUR until further clarity on industrial performance emerges.