Commerzbank expects the Eurozone composite PMI to rise to 51.5 in February, linked to better manufacturing sentiment. It keeps a 0.9% growth forecast for 2026.
The bank expects the industrial PMI to increase to 50 in February. It links the change to looser policy, higher German government spending, a small rise in household consumption, and a lower-than-expected impact from US tariffs.
Eurozone Growth Outlook
It expects ECB key interest rates to remain unchanged for the rest of the year. It also says a rate cut is more likely than a rate rise, as core inflation moves below 2%.
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With next week’s Euro area PMI data expected to be released, we anticipate the composite index will rise to around 51.5. This move above the 50-point threshold would signal a return to modest economic expansion. The improvement is primarily supported by a better outlook in the manufacturing sector.
This expected uptick is particularly significant after we saw largely flat GDP growth in the final quarter of 2025. Recent data from January 2026, which showed a surprising rebound in German factory orders, lends credibility to the idea that industrial sentiment is indeed improving. This follows a period of concern during the second half of 2025 regarding the impact of US tariffs.
Market Strategy Implications
The European Central Bank is expected to keep key interest rates unchanged for the foreseeable future, anchoring the market. With January’s core inflation reading coming in at 1.8%, well below target, the bank’s next move is more likely to be a rate cut than a hike. This policy backdrop should limit significant upward moves in the Euro, making range-trading strategies attractive.
For equity markets, this scenario of gentle growth and stable central bank policy is supportive. Traders might consider buying call options on major European indices, as the low implied volatility makes these positions relatively inexpensive. We believe this is a notable shift from the more defensive positioning we observed throughout much of 2025.
Given the predictable central bank and the slow-but-steady economic recovery, overall market volatility is likely to drift lower. This environment is favorable for selling options premium on the Euro or equity indices. These strategies capitalize on the expectation that price movements will remain contained in the coming weeks.
