EUR/USD had a kneejerk upswing to near 1.1630 before stabilizing lower around 1.1610. Eurozone economic activity unexpectedly gains traction in October driven by the services sector and Germany, BBH FX analysts report.

ECB seen done easing as Fed outlook softens

"The composite PMI overshot expectations in October, rising to a 17-month high at 52.2 (consensus: 51.1) vs. 51.2 in September. The services PMI increased to a 14-month high at 52.6 (consensus: 51.2) vs. 51.3 in September while the manufacturing PMI rose to a 2-month high at 50.0 (consensus: 49.8) vs. 49.8 in September."

"The regional breakdown showed the German composite PMI up to a 29-month high at 53.8 (consensus: 51.5) vs. 52.0 in September reflecting the sharpest increase in service sector business activity for almost two-and-a-half years. In contrast, France’s composite PMI plunge to an 8-month low at 46.8 (consensus: 48.4) vs. 48.1 in September."

"The swaps market continues to price-in about 50% odds that the ECB delivers one more 25bps cut in the next 12 months and the policy rate to bottom at 1.75%. We think the ECB is done easing while the risk is the Fed cuts rates more than is currently priced-in (117bps in the next 12 months). Bottom line: relative ECB/Fed policy stance underpins the uptrend in EUR/USD."