EUR flows: EUR marginally firmer after IFO

EUR/USD firming slightly after the German IFO survey, although this was essentially consistent with yesterday’s German PMI, with modest recoveries in the business, the expectations index and the current conditions index. The data does help confirm that while the German economy is weak, it isn’t seeing a sharp deterioration, and this may prevent the ECB from moving 50bps in December, even though the softness of the inflation data provides some justification for a faster pace of easing. But a 50bp cut in December is only priced as a round a 15% chance at this stage, so there is limited scope for a EUR recovery if this is ruled out, especially since currently the 2 year yield spread points lower for EUR/USD. But the support area at 1.0750 should remain intact for the moment.