Eurozone industrial production fell by 1.4% month on month in December. That was slightly better than expected, as the forecast was a 1.5% drop. The result was 0.1 percentage points less negative than the estimate. In other words, output fell a bit less than the market expected.

Industrial Output Surprise

December’s figure was still negative, but it beat the market’s more pessimistic view. This points to a small amount of resilience in the Eurozone economy, which may ease the most bearish views for a short time. We do not see it as a sign of strength. Instead, it slightly reduces near-term downside risk for European assets. This also matches other recent data. For example, January’s manufacturing PMI rose a little, but at 45.1 it stayed deep in contraction. That suggests the industrial weakness seen in late 2025 has continued into the new year. Because of this, any rally in industry-heavy equity indices, such as Germany’s DAX, should be treated cautiously. The European Central Bank is unlikely to change course based on one release, especially while core inflation remains sticky at 2.4% in January. Inflation is still the main focus, so rate cuts do not look close, even with weak growth. This tension should limit how far markets can rise. For equity index derivatives, this may be a chance to sell out-of-the-money call options on the Euro Stoxx 50. This approach can benefit if the market stays range-bound and fails to break out. We think implied volatility still offers attractive premiums for this type of view. In FX markets, the euro may hold steady in the very short term, but the broader backdrop is still weak versus the US dollar. We are looking at EUR/USD put option spreads to position for a gradual move back toward 1.07. This defined-risk strategy can profit if the euro’s recent strength fades.

Positioning And Market Implications

We saw a similar setup in Q4 2025: data that was “less bad” led to short-lived rallies that later faded. That history suggests any strength over the next week or two could be used to position for the wider slow-growth trend to continue. The main problem—a weak industrial sector—has not gone away. Create your live VT Markets account and start trading now.

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