EUR flows: EUR little affected by weak ZEW

EUR/USD has taken little notice, but the German ZEW survey is very weak. The current conditions index has hit its lowest since the pandemic, while the economic sentiment index is much weaker than expected and the lowest this year. While the ZEW survey doesn’t always have a strong correlation with developments in the economy, it does typically move in line with the equity market, so these soft numbers are not good news for equities or, by implication, the currency. EUR/USD remains attractive against the USD based on yield spread moves, but EUR/JPY may be vulnerable if we see further deterioration in the economy.