EUR flows: EUR supported by strong GDP and CPI

Much stronger than expected German GDP at 0.2% q/q in Q3, to go with the stronger Spanish and French numbers earlier. Although the Italian numbers were weaker than expected, this ensures that the Eurozone number will be above the 0.2% consensus. The German state CPI data is also well above expectations, with y/y rate rosing 0.5% or more. This data has triggered some more EUR/USD gains, with EUR 2 year yields up 6bps in response as the market prices out the risk of more aggressive ECB easing. However, short term spreads still don’t suggest scope for significant EUR strength, so we wouldn’t anticipate a move up to 1.09. But EUR/USD now looks better bid short term and 1.08 is likely to provide good support.