EUR/USD Under Pressure as German Construction PMI Drops to 43.7

Germany's February construction PMI fell to 43.7 from 44.7 in January, marking back-to-back declines in construction activity to start 2026 and reversing a brief return to growth seen at the end of 2025. The data weighs on EUR/USD sentiment as Europe's largest economy shows deepening weakness in its construction sector. While the civil engineering sub-sector recorded modest growth, sharp declines in both housing and commercial segments drove the overall contraction. Adding to concerns, average input prices rose at their fastest pace in five months, creating a stagflationary dynamic of rising costs amid falling output. This combination limits the ECB's policy flexibility, as persistent cost pressures may constrain further rate cuts even as economic activity deteriorates. For EUR/USD traders, the weak construction data adds to a broader narrative of Eurozone economic fragility. Near-term, the euro faces headwinds from softening German fundamentals, though the inflationary component could provide a floor by tempering dovish ECB expectations. Traders should monitor upcoming Eurozone-wide PMI releases for confirmation of the trend.