The European Commission has published the Eurozone consumer confidence data for July 2025, showing a final reading of -14.7, which is the same as the preliminary estimate. The previous consumer confidence figure was -15.3. Economic sentiment improved to 95.8, exceeding the expected 94.5. The earlier figure was revised from 94.0 to 94.2. Industrial sentiment also improved to -10.4, better than the expected -11.0. The prior figure was adjusted from -12.0 to -11.8.

Services Sentiment Rises

Services sentiment increased to 4.1, surpassing the expectation of 3.3. Previously, it was revised from 2.9 to 3.1. This rise in economic confidence is the highest since February, mainly driven by positive signals in the services sector. The future effects of the pending US-EU trade deal remain uncertain. The performance of the services sector is crucial for sustaining economic optimism through the rest of the year. The July economic sentiment data is surprisingly strong, exceeding expectations and reaching a five-month high. This optimism is mainly coming from the services sector, which remains robust. Traders should expect initial gains in the Euro and European markets, including the DAX and STOXX 50. We think this positive news will postpone any discussions about an ECB rate cut, which the market had predicted for late 2025. With core inflation reported at 2.9% for June, above the 2% target, these improved sentiment figures allow the central bank to stay put. This suggests buying call options on the EUR/USD pair, anticipating gains in the coming weeks.

Market Strategy Amid Industrial Pessimism

However, the deep pessimism in the industrial sector, with sentiment at -10.4, is a concern. There is a clear distinction, with July’s flash services PMI at 54.1 and manufacturing PMI at just 45.6, indicating a contraction. This presents opportunities for pair trades, such as going long on services-focused companies while shorting industrial or manufacturing indices. The significant uncertainty affecting this outlook is the final version of the US-EU trade deal, expected to be revealed in August. There are indications that new tariffs on European digital services could be introduced, potentially impacting the optimistic services sector. Therefore, it would be wise to consider downside protection by buying out-of-the-money puts on the Euro STOXX 50. The gap between a thriving services sector and a struggling industrial base is clearer now than during the recovery phase of 2021, when both sectors were more aligned after the initial pandemic shock. Traders should use options to capitalize on this divergence, as the fundamentals favor European assets, but the event risks remain high. Create your live VT Markets account and start trading now.

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