IFO survey of business sentiment printed better than expected for the first time in three months lifting the EUR/USD off the session lows in morning European trade. The IFO rose to 93.9 versus 92.6 forecast – a full two point gain from the month prior. The current assessment index also rose to 89.1 from 88.0 projected.
The upside result in IFO was impressive but not surprising given yesterday’s better than forecast PMI readings which continue to indicate that EZ manufacturing and service sectors are recovering at a slow but steady pace despite challenging exchange rate conditions.
The positive IFO news was somewhat offset by an announcement from GM just prior to the release that it plans to cut 9,000 jobs at its Opel subsidiary. Employment stabilization continues to be the key to further EZ growth in 2010. The region has been able to avoid the draconian job cuts seen in the US, by utilizing a variety of job-mitigation and fiscal stimulus schemes, but analysts worry that any slowdown in demand in H1 of 2010 will precipitate another round of layoffs which would snuff out the nascent recovery.
The EUR/USD rebounded off the 1.4900 level in the aftermath of the report trading back to 1.4940 as some of the risk aversion flows from Asia subsided. However, the pair is likely to remain within the 1.4900-1.4950 range until North America comes on line and focus shifts to the first revision of US GDP numbers which could determine if risk appetite will continue as the day progresses.
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