A new free trade agreement between the European Commission and India could benefit Germany’s economy. Germany’s current trade with India is limited, but this agreement aims to lower India’s high tariffs, which average around 15%. As a result, trade relations and growth are expected to improve.

EU-India Trade Agreement Prospects

The EU-India agreement is detailed and needs approval from both parties to take effect. This deal is likely to be implemented faster than the stalled Mercosur agreement and could boost trade between Germany and India. Recent market observations indicate shifts like the drop in USD/CHF and a missed opportunity for tech gains in the Dow Jones Industrial Average. Also highlighted are the rallies of the New Zealand Dollar and the strength of South Korean assets, offering a broader look at the global economy. (Note: This summary presents factual insights from the original text without personal opinions.) The EU-India free trade agreement, agreed in principle in 2025, is now showing real effects. The expected gains for Germany are becoming concrete, creating trading opportunities. This progress emphasizes the need to focus on instruments that respond to international trade flows and policy changes. Data from Destatis shows that German exports to India rose by 12% year-over-year in the last quarter of 2025, hitting a record €18 billion. This increase is linked to early tariff reductions on some automotive and engineering products. The market is starting to account for the full impact of the deal even before final approval.

Impacts on Currency and Equity Markets

In the currency markets, the EUR/INR pair has become more volatile, testing the 92.50 support level after staying in a higher range through mid-2025. Considering options trading could be wise, especially with the next joint trade commission meeting coming up in February. A stronger rupee against the euro appears to be the ongoing trend. For equity derivatives, investing in long-dated call options on major German exporters listed in the DAX index makes sense. The implied volatility for companies like Siemens and car manufacturers such as BMW is rising because they will benefit from India’s ongoing demand for capital goods. This demand is backed by India’s Manufacturing PMI, which has remained above a solid 55 reading until the end of last year. It’s also important to stay alert for any unexpected issues in the final approval process, which is still uncertain. Similar volatility was seen during the final negotiations of the UK-India trade talks in 2024. Therefore, purchasing protective puts on major European indices like the Euro Stoxx 50 might be an effective strategy against potential political challenges. Create your live VT Markets account and start trading now.

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