Eurozone and US PMI Results

The latest S&P Global PMI data shows that the Composite PMI slightly increased to 52.8 in January from 52.7. The Manufacturing PMI rose to 51.9, but this was lower than the expected 52.1. The Services PMI stayed the same at 52.5, also below the anticipated 52.8. The University of Michigan’s January survey indicated a small boost in consumer sentiment. The Expectations Index climbed to 57, and the Sentiment Index hit 56.4, both surpassing market predictions. In the US, developments regarding potential tariffs on Europe are being closely monitored after a framework agreement in the Greenland dispute. The focus is now on the Federal Reserve, as we expect announcements regarding the next Fed Chair soon. For the Eurozone, the preliminary HCOB PMI data shows a Composite PMI of 51.5 in January, which is slightly below expectations. The Manufacturing PMI increased to 49.4, exceeding forecasts, while the Services PMI fell to 51.9, missing predictions. As we look back at mixed economic signals from last year, we notice similar patterns emerging today, January 24, 2026; however, the situation has changed dramatically. The EUR/USD is currently around 1.0830, much lower than the previous level of 1.1750. Both economies are still dealing with the impacts of the 2023-2024 slowdown. The ongoing weakness in this currency pair suggests that any options strategies should be tailored for a market that may remain stagnant, but with potential for sharp moves based on data.

Analyzing Volatility Strategies

Right now, the US economy appears to be recovering slowly, which is different from the moderate growth seen in early 2025. Recent data from the Bureau of Economic Analysis showed an annualized GDP growth of just 1.3% for Q4 2025, and the latest S&P Global Composite PMI for January was nearly stagnant at 50.4. With the Fed funds rate steady at 4.75%-5.00%, traders might want to consider buying VIX call options to protect against market jitters over possible policy mistakes. The European situation is more troubling, with the latest HCOB Composite PMI for the Eurozone falling to 49.2, indicating a slight contraction. This is weaker than most of 2025, showing that the Euro lacks fundamental strength. Thus, selling out-of-the-money call options on EUR/USD could be a good strategy for generating premium while limiting risk. In this context, implied volatility for EUR/USD options has risen, with the 1-month volatility index now at 8.2%, up from a low of 6.5% late last year. This scenario is favorable for strategies that benefit from price fluctuations in either direction, such as long straddles or strangles focused on the 1.0800 strike price. These positions could profit from a breakout if the Fed or ECB signals a significant policy change in their upcoming meetings. All eyes are on the Federal Reserve meeting scheduled for January 29 and the European Central Bank meeting the following week. We will be watching for any changes in their language regarding potential rate cuts, as the market currently sees a 40% chance of a Fed rate cut by June 2026. Traders in derivatives should consider buying puts with a three-month expiry to safeguard against sudden downturns, targeting the 1.0650 level, which has been a strong support zone. Create your live VT Markets account and start trading now.

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