EUR/USD Under Pressure as Eurozone PMI Hits 62-Month Low Amid Stagflation

EUR/USD faces renewed downside pressure as final Eurozone PMI data confirms a deepening economic contraction, raising stagflation concerns across the bloc. The services PMI printed at 47.6, slightly above the 47.4 preliminary reading but marking the lowest level in 62 months and a sharp decline from the prior 50.2. The composite PMI came in at 48.8, the weakest in 17 months, down from 50.7 previously. Both readings remain firmly below the 50.0 expansion threshold, signaling broad-based economic deterioration. The primary catalyst behind the downturn is escalating uncertainty stemming from the Middle East conflict, which has weighed heavily on business confidence, supply chains, and energy costs across the euro area. The combination of contracting economic activity and persistent inflationary pressures from elevated energy prices creates a challenging policy environment for the ECB, potentially limiting its ability to cut rates despite weakening growth. Traders should monitor upcoming inflation data and ECB commentary for further directional cues on EUR/USD, with the pair likely to remain vulnerable to geopolitical headlines.