Eurozone PMI data is expected to point to a cautious recovery in France and Germany. Both countries are still forecast to stay below the 50.0 level that separates expansion from contraction.
For France, the Services PMI is expected to rise to 49.5, compared with a market forecast of 49.2. January weakness was linked to budget uncertainty.
Cautious Recovery In France And Germany
For Germany, the Manufacturing PMI is forecast at 49.5, matching the market forecast of 49.5. Defence procurement is cited as a factor supporting a small increase.
Despite some improvement, the PMI readings are still expected to remain under 50.0. Delays in procurement are referenced as a reason for the subdued level.
The article notes it was produced using an artificial intelligence tool and checked by an editor.
Looking back at the analysis from early 2025, we recall the sentiment of a cautious recovery in the Eurozone’s core economies. That view proved to be accurate, as the Eurozone composite PMI has only recently crept up to 50.3 in January 2026, underscoring the persistent lack of strong momentum. This continued fragility suggests that traders should remain wary of placing aggressive, bullish bets on broad European equity indices.
Trade Ideas For A Slow Growth Backdrop
We remember the expectation that German manufacturing would slowly improve, partially supported by defense spending. Recent data confirms this slow grind, with German industrial production showing a meager 0.2% year-over-year increase for 2025, highlighting that a robust industrial revival has not occurred. Therefore, traders might consider selling call spreads on the DAX index, a strategy that profits from a sideways or slightly rising market rather than a strong breakout.
The rebound in French services, anticipated back in 2025, did materialize but has since struggled to accelerate amid sticky inflation. With Eurozone core inflation still at 2.7% as of January 2026, the European Central Bank has limited room to stimulate the economy with rate cuts. This suggests that trades based on short-term interest rate futures, which bet against swift policy easing, could offer value.
The overall environment of slow growth and persistent uncertainty is reflected in market volatility. The VSTOXX index, which measures volatility for the Euro Stoxx 50, is currently trading near a historical low of 15.1. Given the fragile economic backdrop that has been developing since early 2025, buying long-dated VSTOXX call options could be a cost-effective way to insure portfolios against a potential economic shock in the weeks ahead.
