The euro area composite purchasing managers’ index (PMI) for manufacturing and services rose to 51.9 in February, up from 51.3 in January. This follows declines in the previous two months and suggests the economy is stabilising. The PMI is still in a range that is often linked with moderate economic growth in the euro area. Sentiment improved more in manufacturing, while services rose only slightly.

Euro Area Growth Outlook

Commerzbank expects the euro area economy to grow again this year. It expects growth to be weaker than in Germany and no higher than last year. This piece was produced using an artificial intelligence tool and reviewed by an editor. It was attributed to the FXStreet Insights Team, which compiles market notes from external experts and adds input from internal and external analysts. With the February 2025 PMI rising to 51.9, we see a clear sign of stabilisation in the euro area economy. This suggests the recent slowdown was temporary and that we are moving back to a period of moderate, steady expansion. More predictability could reduce market volatility in the weeks ahead. This data also gives the European Central Bank room to wait before making further interest rate changes. After the rate cuts across much of 2024, a stable PMI reading means the ECB is not under pressure to act quickly in either direction. For traders, this supports strategies that target short-term interest rates staying within a narrow and predictable range.

Equities And Currency Strategy

For European stock indices like the EURO STOXX 50, a steady economic backdrop is supportive, but it is unlikely to trigger a major rally. This environment may suit strategies that benefit from falling volatility, such as selling out-of-the-money puts or calls. We expect implied volatility to decline as markets absorb the signal of steady, non-dramatic growth. In currency markets, the euro may not strengthen much, especially if euro area growth lags behind Germany and the United States. Last month’s data showed US retail sales beating expectations, pointing to a stronger US economy. As a result, option strategies on EUR/USD that benefit from the pair trading within a defined range may be worth considering. Create your live VT Markets account and start trading now.

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