This morning’s IFO data confirm what the PMIs told us – expectations are down, FX strategist Kit Juckes at Societe Generale notes.

Euro is unlikely to get back to 1.08

“Whether the French elections are a driver of the increased uncertainty and caution, or not, is hard to tell, but either way the lift the Euro (EUR) was getting from positive economic surprises, is melting away.”

“Meanwhile, a regression of EUR/USD against the OAT/Bund yield differential suggests that EUR/USD ought to be heading to parity. That it isn’t, may tell us a market which is already long USD in a multitude of ways, and has bought into US exceptionalism hook, line and sinker, hasn’t got a great many more euros to sell.”

“However, just as I might scratch an itch, even though I know it’s futile, I continue to draw these charts because they make me worry! At the very least, the topside for EUR/USD is very limited and while it has a bit of a Monday morning bid today, I doubt we’ll get back to EUR/USD 1.08, let alone higher.”