Eurozone industrial production fell 1.4% month on month in December, but rose 1.2% year on year. The monthly drop followed weak December data from Germany and France.<\/p>\n
Structural pressures on industry remain. Natural gas prices in Europe are still more than three times higher than in the US.<\/p>\n
Chinese exports to Europe continue to rise at a strong pace. European exporters also face higher import tariffs in the US.<\/p>\n
A European Commission business survey in January showed export orders stayed weak, while overall orders improved. This points to firmer domestic demand within the eurozone.<\/p>\n
German stimulus plans are expected to support demand. German industrial orders rose by nearly 20% over the last four months of 2025.<\/p>\n
Inventories also appear closer to normal, with stock assessments near their historical average. Manufacturing is expected to add to eurozone growth in 2026, even though these structural issues remain.<\/p>\n
The Eurozone’s industrial sector appears to be in a cyclical recovery, even though production dipped in December 2025. We are seeing this as a sign of underlying strength, especially with the surge in German industrial orders we witnessed in the final months of last year. This suggests that domestic demand within the bloc is starting to become a more important driver of growth.<\/p>\n
This positive outlook is being confirmed by more recent data from early 2026. For example, the latest German Ifo Business Climate Index released for February just climbed to 91.5, marking its highest reading in over a year. This supports the idea that the inventory correction is behind us and that businesses are feeling more optimistic.<\/p>\n
For the coming weeks, we should consider positioning for this upside through equity derivatives. Long call options on indices like the EURO STOXX 50 offer a direct way to gain exposure to a broad European manufacturing recovery. Given the potential for volatility, using bull call spreads could be a prudent way to define risk while still targeting gains.<\/p>\n
This economic strengthening should also provide a floor for the euro. While structural issues like high energy costs persist, with European natural gas still trading around \u20ac85 per MWh, the improving domestic picture could favor long EUR\/USD positions. Using call options on the currency pair allows for participation in potential upside while capping the initial investment.<\/p>\n
The recovery also has implications for interest rates, making it less likely the European Central Bank will cut rates soon. Flash inflation estimates for January 2026 held firm at 2.3%, reinforcing the view that the ECB will remain patient. This situation is somewhat reminiscent of the post-2010 recovery, where a cyclical rebound put upward pressure on rate expectations faster than many had predicted.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Eurozone output slipped in December, but annual growth held; domestic demand, German stimulus, lower inventories support 2026.<\/p>\n","protected":false},"author":62,"featured_media":16994,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41996","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41996","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41996"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41996\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16994"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41996"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41996"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41996"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}