EUR flows: Weak French PMI pulling EUR lower

EUR/USD has dropped back after a very weak French services PMI index. The German index was broadly unchanged and in line with consensus but the French composite PMI is the lowest since the pandemic. The Eurozone PMI was already weaker in April, and looks likely to dip further in May as a result. The EUR should consequently be vulnerable across the board, but particularly against the USD and JPY. EUR/JPY remains extremely overvalued and out of line with all historic correlations, and worries about Eurozone growth could well trigger a significant decline.