The Eurozone’s final manufacturing PMI for July is 49.8, staying the same as the preliminary reading and slightly increasing from 49.5 last month. Production has seen a small rise, even though new orders have slightly decreased. The PMI data shows that smaller economies in the Eurozone, like Spain and the Netherlands, are experiencing growth. Meanwhile, Ireland and Greece are still expanding. In larger economies like Germany, France, and Austria, the manufacturing recession seems to be easing, which is a hopeful sign for recovery.

Current Obstacles in France

France is currently hindering manufacturing growth in the Eurozone, with production dropping for the past two months, even as employment has seen a small rise. On the other hand, Germany is seeing production growth, but employment has decreased. France is dealing with a strict budget and rising political risks, while Germany enjoys stable fiscal policies. Additionally, the Eurozone’s supply chains are under strain, with longer delivery times not linked to increased demand. Issues with supply chains are worsened by changing U.S. tariff policies and geopolitical conflicts, affecting efforts to maintain sustainability in the Eurozone’s manufacturing sector. The Eurozone manufacturing sector shows some improvement but has not yet reached expansion, with a PMI of 49.8. This is the fourth month of improvement since it hit a low of 46.2 in March 2025. Traders should be cautious with European equities, as this recovery remains very fragile.

Emerging Opportunities and Risks

The details suggest ongoing volatility, fueled by political uncertainty in France and ongoing supply chain issues. The VSTOXX index, which measures fear in Europe, is hovering around 20, notably higher than its historical average from the late 2010s. In this environment, option strategies that limit risk and take advantage of price movements are more favorable than direct bets on the market. Germany is becoming a strong area, with rising production and a more stable political situation. Recent data backs this up, as Germany’s IFO Business Climate Index for July reached a 12-month high of 92.5. There are opportunities to buy call options on the DAX index or top German industrial companies that benefit from this positive trend. Conversely, France’s manufacturing sector seems to be a major drag on the Eurozone. This is highlighted by France’s latest INSEE business confidence indicator, which unexpectedly dropped to 97, the lowest since the political unrest of early 2025. A pairs trade, where one goes long on German assets and shorts French ones through futures or CFDs, could effectively exploit this difference. We also need to keep an eye on the ongoing strain on supply chains, which is causing longer delivery times for goods. Current delays are similar to the disruptions seen after the pandemic in 2021 and 2022, now primarily driven by geopolitical tensions instead of health issues. This poses a risk for manufacturers that depend heavily on just-in-time inventory systems. This PMI reading is likely to keep the European Central Bank inactive for now. Being just below the key level of 50 does not support any tightening of monetary policy. The interest rate futures market supports this, with less than a 10% chance of an ECB rate hike before the end of the year. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now