Lawmakers in Europe are worried about the trade deal between von der Leyen and Trump. French Prime Minister François Bayrou criticized the deal, saying it moves away from protecting common interests. In Germany, Chancellor Merz supports the deal, but there is unhappiness at home. Industry leaders have called it “inadequate” and warned it could lead to economic problems.

Hungary and Italy’s Reaction

Hungarian Prime Minister Viktor Orban criticized von der Leyen’s handling of the deal, saying she is outmatched by Trump. In Italy, Brando Benifei, who leads the parliament’s committee on US relations, expressed his dissatisfaction and emphasized the need for careful review of the agreement. Many believe this deal is more about managing issues than providing real benefits for Europe. With the backlash from leaders like Bayrou, we expect to see higher market uncertainty in the weeks ahead. Europe’s main volatility index, the VSTOXX, is currently trading low around 14, making it cheap to buy protection against sudden market changes. We see this as a chance to purchase volatility derivatives before market sentiment worsens. The negative response from German industries and cautious comments from Benifei suggest potential challenges for European stocks. We think it’s wise to buy put options on major indices like the Euro Stoxx 50 and the German DAX. Historically, during the 2018 US-EU trade disputes, the DAX dropped more than 15%, showing how sensitive it is to trade tensions.

Currency and Economic Impact

Criticism from leaders like Orban can shake confidence in the euro, especially with a strong US dollar. Recent data shows the dollar index (DXY) gaining strength while the EUR/USD exchange rate is struggling to stay above 1.07. We will look at derivatives that benefit from a decline in the EUR/USD pair. The disagreement faced by Merz directly pressures Germany’s export-driven economy, which is already under strain. German factory orders unexpectedly fell by 0.4% when a rise was expected, highlighting ongoing industrial weakness. Therefore, we are considering bearish positions on specific stocks in the German automotive and manufacturing sectors. Create your live VT Markets account and start trading now.

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