Eurozone PMI data is expected to show a cautious recovery in France and Germany. Even so, both countries are still forecast to stay below 50.0, the level that separates expansion from contraction.
In France, the Services PMI is expected to rise to 49.5, above the market forecast of 49.2. January’s weakness was linked to uncertainty around the budget.
Cautious Recovery In France And Germany
In Germany, the Manufacturing PMI is forecast at 49.5, in line with the market forecast of 49.5. Defence procurement is seen as one reason for the small improvement.
Even with some progress, both PMI readings are still expected to remain below 50.0. Procurement delays are also cited as a reason results remain weak.
The article notes it was produced using an artificial intelligence tool and reviewed by an editor.
Looking back at the analysis from early 2025, the view was that the Eurozone’s core economies were in a cautious recovery. That has largely played out. The Eurozone composite PMI only recently edged up to 50.3 in January 2026, showing that momentum is still limited. This ongoing fragility suggests traders should be careful about making aggressive bullish bets on broad European equity indices.
Trade Ideas For A Slow Growth Backdrop
In early 2025, the expectation was that German manufacturing would improve slowly, helped in part by defence spending. Recent data supports that slow pace. German industrial production rose just 0.2% year over year in 2025, showing there has been no strong industrial rebound. As a result, traders could consider selling call spreads on the DAX index. This strategy can benefit from a market that moves sideways or rises only slightly, rather than breaking out sharply higher.
The French services rebound expected in 2025 did happen, but it has struggled to pick up speed due to sticky inflation. With Eurozone core inflation still at 2.7% in January 2026, the European Central Bank has less room to support growth with rate cuts. That may create opportunities in short-term interest rate futures for trades that do not rely on rapid policy easing.
Slow growth and persistent uncertainty also show up in market volatility. The VSTOXX index, which tracks volatility for the Euro Stoxx 50, is near a historical low at 15.1. Given the fragile backdrop that has developed since early 2025, buying long-dated VSTOXX call options could be a relatively low-cost way to hedge portfolios against a potential economic shock in the coming weeks.
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