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    BBH analysts note that Eurozone GDP growth exceeds expectations, enabling the ECB to maintain rates.

    by VT Markets
    /
    Jan 30, 2026
    Eurozone GDP growth in Q4 exceeded expectations, reaching 0.3% quarter-on-quarter. This beats the consensus and the European Central Bank (ECB) forecast of 0.2%. It also matches the growth rate from Q3, putting the ECB in a good position to keep interest rates unchanged. Experts believe the ECB can maintain steady rates for a while due to this growth. The swaps curve indicates rates are likely to stay at 2.00% for the next year, with no significant changes expected in the short term.

    Reflections From 2025

    Looking back at early 2025, we experienced a period of stability after Q4 2024 GDP growth outperformed expectations. This allowed the ECB to keep rates steady, leading to low implied volatility in EUR options as the market anticipated stability for the coming year. Today, however, the situation is quite different, presenting a new set of risks and opportunities. Recent Eurostat estimates for January 2026 show headline inflation rising to 2.9%, while the preliminary Q4 2025 GDP report indicated stagnation at 0.0%. This sharply contrasts the stable growth we discussed a year ago. The ECB now faces a tough choice between tackling rising inflation and preventing a recession. Unlike the clear outlook of early 2025, the swaps market now suggests there’s almost a 50% chance of a rate hike by the ECB’s meeting in April. This uncertainty is critical for traders to watch in the coming weeks.

    Rising Volatility And Strategic Implications

    This uncertainty has led to increased implied volatility, with the Euro Stoxx 50 Volatility Index (VSTOXX) rising from around 13 late last year to over 18. Traders should be aware that strategies that worked well in a stable environment now carry more risk. Positions that benefit from larger price movements, such as buying puts or calls on EUR futures, may become more appealing ahead of upcoming inflation reports and ECB announcements. Create your live VT Markets account and start trading now.

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