The eurozone’s seasonally adjusted trade balance rose to €11.6bn in December, up from €10.7bn in the prior period.
The larger Eurozone trade surplus in December 2025 confirms a clear trend: external demand is improving. This is a positive sign and suggests the Eurozone economy is holding up better than many expected going into the year. We should update our outlook and expect stronger growth in Q1 2026.
This strength could support the euro in the coming weeks. Data from the U.S. Commodity Futures Trading Commission shows speculative net-long euro positions have been rising since January, which suggests this view is spreading. We should consider long EUR/USD exposure, potentially through call options to limit downside while targeting a move toward 1.10.
European equities could also benefit, especially in export-heavy markets like Germany. The German DAX, which has many exporters, is already up more than 3% since the start of the year. The latest trade data may add another tailwind, making call options on major European indices an appealing approach.
This positive picture is complicated by last week’s January 2026 inflation report. Core CPI stayed at 2.3%, slightly above the ECB’s target. Strong trade data plus sticky inflation makes a near-term ECB rate cut less likely. This is different from 2025, when markets expected sharp cuts this year.
Because rate cuts look unlikely soon, we should be careful with long government bond positions. We expect short-term yields could keep edging higher as markets reprice ECB expectations. Traders could look at strategies that benefit from higher yields, such as shorting German 2-year bond futures.
The current surplus also stands out compared with the energy-driven deficits seen in 2023. Moving back to a solid surplus points to a real improvement in the Eurozone’s trade position. It also suggests the region is in a stronger place than it was during the post-pandemic recovery.
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