EUR: PMIs not moving ECB pricing For once, US-eurozone divergence in data has come to the benefit of EUR/USD, which is attempting consolidation at 1.0700 this morning. As noted above, hard data (inflation and employment above all) has been the real drag on the pair so far, so caution is warranted when it comes to rallies prompted by activity surveys like PMIs. This morning, the German Ifo will be in focus, with consensus expecting an improvement across all three main surveys (business climate, current assessment and expectations). Good figures could cement more upbeat expectations on eurozone growth, although the chances that this materially impacts European Central Bank pricing are low. Markets appear very comfortable with pricing for 75bp of easing by year-end, and ECB members appear to be converging around this view. Even the generally hawkish Joachim Nagel reiterated yesterday that it may be appropriate to cut rates as inflation declines. All this makes us reluctant to call for another leg higher in EUR/USD: the 2-year EUR:USD swap rate gap has tightened by a mere 5bp since the -160bp bottom, and continues to unequivocally point at a weaker EUR/USD. We have long discussed how resilient equities have played a role in keeping EUR/USD above its yield differential-implied short-term fair value, so a continuation of the positive risk sentiment environment appears necessary to keep EUR/USD above 1.0700.