Insights 
VT 
The Euro is gradually increasing in value, supported by short-term spreads keeping Eurozone and US short-term yields compressed. Recent gains are encouraging, but markets are cautious about pushing the Euro higher before upcoming Q3 GDP data, particularly due to concerns about potentially weak German figures following a -0.3% outcome in Q2.
The Euro has risen for five consecutive days, though the increase is minor, remaining within recent limits. If gains surpass 1.1665/70, this could stimulate further growth and possibly lead to a retest of the previous peak at 1.1728.
We are seeing the Euro grind higher for a fifth straight day, but the upward momentum is weak as it approaches the 1.08 level. This cautious mood is understandable with crucial Q3 GDP figures for Germany and the wider Eurozone due this Thursday. Traders are hesitant to push the currency much higher before seeing that data.
This price action feels very familiar, reminding us of a similar pattern back in late 2021 when the Euro was struggling around the 1.16 mark. Then, just as now, the market was worried that a weak German GDP report could kill the rally before it even started. The market’s memory of that period suggests we should expect similar hesitation today.
The Euro’s current strength is underpinned by the narrowing yield gap between the US and the Eurozone. The spread between US and German 2-year government bonds has compressed to just 40 basis points in October 2025, down from over 70 basis points last month. This reflects recent US inflation data softening to 2.5%, while the Eurozone’s remains stubbornly above 3%.
For derivative traders, this environment of slow grinding with a major risk event ahead suggests using options to define risk. A bull call spread could be an effective way to position for a limited move higher through the 1.0850 resistance level if the GDP data is positive. This strategy caps both potential profit and, more importantly, the initial cost and risk.
Conversely, if the German Q3 GDP data confirms the weakness seen in their -0.1% contraction in Q2 2025, the Euro could quickly fall. Traders anticipating a negative surprise should consider buying cheap out-of-the-money put options below the 1.07 level. This provides a low-cost way to profit from a sharp downward move.
