Eurozone And US PMI Results
Preliminary S&P Global PMI data indicate the Composite PMI edged up to 52.8 in January from 52.7. The Manufacturing PMI increased to 51.9, missing a forecast of 52.1, while the Services PMI remained unchanged at 52.5, below the expected 52.8.
The University of Michigan’s January survey showed a slight improvement in consumer sentiment. The Expectations Index rose to 57, and the Sentiment Index reached 56.4, both exceeding market expectations.
Meanwhile, US actions on potential European tariffs remain under watch after a framework agreement in the Greenland dispute. Attention is now on the Federal Reserve, with an announcement on the next Fed Chair anticipated soon.
In the Euro market, preliminary HCOB PMI data show a Composite PMI at 51.5 in January, slightly missing expectations. The Manufacturing PMI rose to 49.4, beating forecasts, while the Services PMI dropped to 51.9, failing to meet predictions.
Looking back at the mixed economic signals from last year, we see a familiar pattern emerging today, January 24, 2026, though the context has shifted significantly. The EUR/USD is no longer near 1.1750; it currently struggles around the 1.0830 mark as both economies grapple with the after-effects of the 2023-2024 slowdown. This sustained weakness in the pair suggests that any options strategies should be carefully calibrated for a range-bound market with potential for sharp, data-driven moves.
Analyzing Volatility Strategies
The US economic picture we see now is one of sluggish recovery, contrasting with the moderate growth seen in early 2025. Recent data from the Bureau of Economic Analysis shows annualized GDP growth for Q4 2025 came in at a tepid 1.3%, and the latest S&P Global Composite PMI for January registered a near-stagnant 50.4. With the Fed funds rate holding at 4.75%-5.00%, traders should consider buying VIX call options as a hedge against market anxiety over a potential policy error.
On the European side, the situation is more concerning, with the latest HCOB Composite PMI for the Eurozone dipping to 49.2, indicating a mild contraction. This is a weaker reading than we saw throughout most of 2025, suggesting the Euro has little fundamental strength to draw upon. This divergence makes selling out-of-the-money call options on EUR/USD, as part of a bearish call spread, an attractive strategy to collect premium while capping risk.
Given this backdrop, implied volatility for EUR/USD options has been climbing, with the 1-month volatility index now at 8.2%, up from a low of 6.5% late last year. This environment is ideal for strategies that profit from price movement, regardless of direction, such as long straddles or strangles centered around the 1.0800 strike price. These positions would be positioned to capitalize on a breakout should either the Fed or ECB signal a clear policy shift in their upcoming meetings.
Attention is now firmly on the upcoming Federal Reserve meeting on January 29 and the European Central Bank meeting a week later. We will be watching for any change in language regarding the timing of potential rate cuts, as the market is currently pricing in a 40% chance of a Fed rate cut by June 2026. Derivative traders should protect against sudden downside by purchasing puts with a three-month expiry, targeting the 1.0650 level which has served as a strong support zone.
