The ifo institute has reported in a press release, highlighting the advance results of its World Economic Survey, that the economic climate in the euro-zone continues to decline in 2008 as reflected by its Economic Climate Indicator falling to its lowest level in 15 years. The ifo report says “The most unfavourable economic climate prevails in Spain and Ireland” with the current economic situation in Italy, Belgium, France, Austria and Germany also worsening. The outlooks for the Irish, Portuguese and Dutch economies have deteriorated significantly.
Inflation is expected to decline over the next 6 months and monetary policy loosened over the same period. Respondants to the survey commented on current fx levels and said that compared to the euro, both the U.S. dollar and Japanese yen are undervalued and expected to see further recovery. With that in mind, EUR/USD continues to look soft this morning, presently down at 1.2535.