Eurozone PMI Services Stabilize While Cooling Inflation Supports ECB Pause

Eurozone business activity stabilized in June, with the final Composite PMI rising to 50.0 from 48.5 and the Services PMI improving to 49.4 from 47.7. The data suggest the region has moved out of contraction as manufacturing continues to expand and the services downturn eases. Crucially for markets, input cost inflation in services fell at its fastest pace since the survey began in 1998 (excluding COVID lockdowns), driven by lower energy prices after the US-Iran ceasefire. The cooling inflation backdrop and recovering confidence strengthen the case for an ECB pause rather than additional near-term rate hikes. For European assets, the report is mildly supportive for growth-sensitive risk sentiment but potentially bearish for the euro if traders price in a more dovish ECB stance.