BNP Paribas forecasts Eurozone growth of 1.6% in 2026, up from 1.5% in 2025. It expects quarterly growth of around 0.5% throughout 2026.
Inflation is expected to stay below the 2% target in 2026. BNP Paribas sees inflation rising in 2027, but only gradually.
Eurozone Growth Outlook
The outlook depends on stronger growth and fiscal support in Germany, along with higher military spending. BNP Paribas expects these factors to lift European growth compared with the United States.
Based on this view, it expects the US dollar to keep weakening against the euro. It also forecasts EUR/GBP will rise steadily to 1.20 by Q4 2026.
BNP Paribas expects the European Central Bank to raise rates in the second half of 2027. This would take the deposit facility rate to 2.5%.
Overall, the Eurozone outlook remains firm. The 2026 growth forecast is unchanged at 1.6% after a resilient 2025. Recent data supports this steady trend. For example, the January 2026 S&P Global Eurozone Composite PMI came in at 51.5, pointing to continued expansion. This suggests derivative traders may want to consider trades that benefit from stable, positive momentum in Europe.
Trading Implications
Inflation is still under control. Eurostat’s flash estimate for January 2026 puts headline inflation at 1.8%, comfortably below the 2% target. This supports the view that the ECB is unlikely to hike before the second half of 2027. A steady policy outlook may favor long-dated options strategies that benefit when volatility stays lower than expected.
This contrasts with a cooling US economy. Q4 2025 GDP growth was slightly below forecasts, and recent jobs data shows wage pressure is easing. This gap in economic momentum is likely to be a key theme in the coming weeks. As a result, the dollar may continue to weaken against the euro.
For traders, this favors a long EUR vs. USD view. Buying EUR/USD call options or selling put options are possible ways to express this. Because the forecast implies a gradual rise, traders may prefer structures that profit from a steady climb rather than a sudden jump.
A similar move is expected in EUR/GBP. BNP Paribas expects a moderate rise toward 1.20 by the end of 2026. The Bank of England has sounded more dovish than the ECB, as the UK posted weaker growth in late 2025. This policy gap should continue to support the euro against the pound.
The Eurozone’s 1.5% growth in 2025, despite global uncertainty, helped set up today’s stronger base. Supportive German fiscal policy and coordinated increases in military spending are now adding to growth. This underlying strength suggests that short-term dips in the euro could offer buying opportunities.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
