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Germany’s Economic Indicators
The ZEW Survey, released at 09:00 GMT, expected the Economic Sentiment Index at 40.5 and the Current Situation Index at -75.0. Germany’s inflation data in September showed no impact on EUR/USD, with a 2.4% annual rise in the Harmonized Index of Consumer Prices.
The EUR/USD pair hovered around 1.1570, with a bearish outlook supported by a Relative Strength Index below 50. Looking towards resistance, the nine-day Exponential Moving Average stood at 1.1627, while the 50-day was at 1.1671. Political unrest in France and an upcoming US Federal Reserve Chair speech added to market uncertainties.
Today’s German ZEW data suggests a cautious approach, as the miss on expectations points to underlying weakness in the Eurozone’s largest economy. The sentiment for the future ticked up but failed to meet forecasts, while the assessment of the current situation has worsened significantly to -80. This growing gap between future hopes and current reality often signals trouble ahead for the Euro.
This report doesn’t exist in a vacuum, as it confirms a broader trend of economic sluggishness we’ve been watching. Recent data from Destatis showed German industrial production fell by 0.8% in August 2025, marking the third consecutive monthly decline. Furthermore, the latest HCOB Flash Eurozone Manufacturing PMI registered a reading of 45.9, indicating the manufacturing sector has been in contraction for over a year.
Strategic Market Approaches
The US Federal Reserve’s stance provides a stark contrast, which strengthens the case for a weaker Euro against the dollar. All eyes are on Jerome Powell’s upcoming speech, but we note that market pricing via the CME FedWatch Tool shows only a 15% chance of a rate cut before the end of 2025. This policy divergence between a hawkish Fed and a struggling Eurozone puts downward pressure on the EUR/USD pair.
Given this outlook, we should consider buying put options on EUR/USD to profit from a potential slide. The pair is already testing a two-month low near 1.1542, making puts with a strike price of 1.1500 or 1.1450 for the coming weeks an attractive strategy. This allows us to have defined risk while betting on a continued downtrend.
For those with a more neutral-to-bearish view, selling out-of-the-money call spreads on EUR/USD could be an effective strategy to collect premium. We could sell a call option with a strike price near the 1.1671 resistance level and buy a further-out call for protection. This position profits as long as the Euro does not stage a significant rally in the near term.
Finally, we must account for potential spikes in volatility due to the French political situation and the upcoming Powell speech. Looking back at similar periods of policy divergence in 2023 and 2024, we saw implied volatility on EUR/USD options rise significantly around central bank events. If current implied volatility is low, buying options is cheaper, but if it is already elevated, selling premium through spreads is preferable.
