Germany’s industrial production dropped by 1.9% in June 2025, according to Destatis. This is worse than the expected 0.5% decrease. The figure for the previous month was adjusted from a 1.2% increase to a 0.1% decrease. This decline represents the lowest manufacturing output since May 2020. The German statistics office explained that the significant revision for May was due to updates from some automotive companies.

Part Of The Second Quarter Data

This downturn is included in the second-quarter data, as markets are already shifting their focus beyond this time frame. This data is shocking, showing that German manufacturing has reached its lowest point since the beginning of the pandemic in May 2020. The big revision for May 2025, related to the auto sector, indicates that the situation is worse than many expected. While markets were prepared for a weak Q2, the severity of June’s report is unexpected and concerning. Given this situation, buying put options on the German DAX index for the upcoming weeks could be wise. With the DAX around 17,500, considering September puts with strike prices of 17,200 or even 17,000 may provide protection and profit from an expected downturn. This strategy assumes that the market hasn’t fully accounted for the risk of a German recession.

Euro Vulnerability

The Euro appears vulnerable, especially compared to a stronger US dollar. Recent US jobs data for July 2025 was better than anticipated, highlighting a significant difference in policy direction compared to the European Central Bank. Because of this, we should expect weakness in the EUR/USD pair, making put options on the Euro a reasonable choice. This weakness in Germany may raise concerns across Europe, impacting the Euro Stoxx 50 index. Increased uncertainty and price fluctuations are likely. Traders should consider buying call options on volatility indexes like the VSTOXX to protect against or profit from this expected volatility. The European Central Bank will struggle to justify any additional tightening with Germany’s economy faltering. This data may prompt the ECB to adopt a more dovish stance at its upcoming meeting in September, making long positions on German government bond (Bund) futures an appealing safe-haven option. We should recall how Germany’s industrial sector suffered during the energy crisis in 2022 and 2023. The recent July 2025 manufacturing PMI reading of 42.5 indicates that this isn’t just a one-time setback but a continuing trend of contraction. This historical context supports the view that Germany’s economy is facing serious structural challenges. Create your live VT Markets account and start trading now.

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