The German economy may still have some gas in the tank after the IFO Business Climate survey showed some promising surprises. Confidence is at a three-year high with businesses particularly pleased with current business conditions, which rose to a reading of 109.7 in September. This was somewhat tempered by future expectations easing to 103.9 from 105.2 the previous month. However, combining these two factors lead to an overall improvement in the business climate to 106.8 which surprised economics that projected the measure to fall to 106.4. The result caught investors off-guard as recent indicators pointed to a contraction in the German economy after manufacturing activity and factory orders declined in recent months. Economist Joerg Lueschow of West LB raised the point that domestic demand has begun to pick up and will compensate for any reduction in exports. This may be true considering a recent poll conducted by Bloomberg. German Chancellor Angela Merkel was the most popular among investors for her business policies, suggesting that the Chancellor's tough stance on austerity may indeed garner support from the German public and help to restore confidence, which in turn could boost domestic spending. The euro is reflecting the confidence emanating from the German economy, with the single currency rising 0.72% to $1.3410. However, the euro is still set for a rocky ride with Ireland yesterday reporting a surprise drop in GDP and Spain expected to announce new budget initiatives this afternoon. David Choe, London