In July 2025, Germany’s industrial orders dropped by 2.9%, while a rise of 0.5% was expected. Earlier, the orders had been adjusted from a decline of 1.0% to a smaller decrease of 0.2%. When we exclude large orders, there was a 0.7% increase from the previous month. Over the three months from May to July 2025, new orders rose slightly by 0.2% compared to the prior three months.

Impact Of Transport Equipment Sector

The fall in manufacturing orders in July is largely due to a 38.6% decrease in the ‘manufacture of other transport equipment’ sector. This area includes aircraft, ships, trains, and military vehicles. The unexpected 2.9% drop in German industrial orders is putting pressure on European assets. This morning, DAX futures slid below 17,500, and the EUR/USD pair weakened, nearing 1.0650. This news aligns with concerns from last week’s German manufacturing PMI, which remained below 44. However, the overall figure can be misleading due to a significant drop in the often-volatile transport equipment sector. Excluding these large orders shows a healthier 0.7% increase, indicating that the core industrial economy isn’t as weak as initially thought. This suggests the market’s quick sell-off might be an overreaction, creating an opportunity to profit from overstated volatility. Given these insights, we’re considering selling out-of-the-money puts on the DAX index for short-term gains. Another option is to short VSTOXX futures, anticipating that implied volatility will decrease as the market processes the report. The stable three-month average supports the idea that the overall trend is not one of severe decline.

ECB Meeting Considerations

This report will be crucial for the European Central Bank’s meeting next week. With Eurozone inflation at a stubbornly high 2.7% in August, this weak growth data from Germany makes aggressive rate hikes less likely. This could support equity markets in the upcoming days, making outright short positions riskier. We’ve seen similar patterns in the lead-up to 2020, where fluctuations in aircraft and military orders caused misleading monthly reports that didn’t reflect the broader economic picture. The market tends to overlook these volatile elements over time. History suggests that buying during dips or selling puts against them has often been a successful strategy. Create your live VT Markets account and start trading now.

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