EUR flows: Steady after IFO and INSEE surveys
IFO and INSEE both slightly stronger thna expected, but underlying picture in Europe still weak
The German IFO index for May is slightly stronger than expected, but still weak compared to the last few years, with the expectations index particularly soft. The numbers are not particularly surprising after yesterday’s PMI. The French INSEE survey earlier was stronger than expected, especially after yesterday’s weak French PMI, although it relates more to the manufacturing sector which was comparatively robust.
EUR/USD remains fairly steady just above 1.16, but the weakness evident in the last couple of months surveys suggests downside risks against the USD and JPY, given the relative strength of the US data. There are also negative risk implications of a European slowdown and the continuing Middle East tension, but for now at least the equity markets remain resilient, and riskier currencies are consequently holding their own.
