EUR/USD did not react to the PMIs and is rangebound after retreating from the high of 1.0927 yesterday. In the view of economists at Société Générale, the pair has travelled a considerable distance.

More risk hangs on ECB pricing than on the Fed

“Manufacturing PMI for France and services for Germany rose in January to the highest level since June. The stagnation of manufacturing in Germany reins in optimism for a further improvement in IFO current conditions tomorrow but may not halt a fourth successive rise in expectations.” 

“There’s currently around 93 bps discounted over the next two ECB meetings, compared with 46 bps for the FOMC. We’d argue that more risk hangs on ECB pricing than on the Fed.”

“We’re not looking for excuses to take profits in EUR/USD but it’s another way of arguing that, portfolio flows aside, EUR/USD has travelled a considerable distance.”