Germany’s year-on-year gross domestic product growth in the first quarter came in at 0.4%.
This was above the forecast of 0.3% for the same period.
German Growth And Equity Volatility
This slightly better-than-expected growth figure for Germany suggests some economic resilience, which could temper downside fears in the market. We might see this as an opportunity to sell some out-of-the-money puts on the DAX index, capitalizing on a potential floor under German equities in the near term. The VDAX-NEW volatility index, currently sitting near 14.5, also indicates that option premiums are not excessively high, making such a strategy more attractive.
However, this data must be weighed against recent Eurozone inflation, which for April 2026 came in at 2.7%, still stubbornly above the central bank’s target. A stronger German economy may give the European Central Bank cover to delay further interest rate cuts, a sentiment we’ve seen reflected in a slight flattening of the EURIBOR futures curve this week. Therefore, trades anticipating aggressive rate cuts in the third quarter should be reconsidered.
This environment could provide modest support for the euro, potentially making call options on the EUR/USD pair more appealing as it hovers around the 1.09 mark.
Cautious Optimism For Europe
Looking back at the industrial weakness we saw for much of 2025, this GDP print, combined with the latest manufacturing PMI which rose to 49.5, suggests a slow turnaround is in motion. This reinforces a view of cautious optimism rather than a full-blown bull market.
