The Eurozone ZEW Survey improved to 40.8 in January, exceeding the expected 35.2 and December’s 33.7. The German ZEW Survey for Economic Sentiment also climbed to 59.6, outperforming the forecast of 50.0 and the previous report of 45.8. The Current Situation index, which measures how investors feel, rose to -72.7 from December’s -81.0, surpassing the prediction of -75.5. Despite these increases, the Euro’s (EUR) market reaction has been limited. However, the EUR/USD rate is up by 0.7%, trading around 1.1730. Today, the Euro has strengthened against major currencies, showing a 0.70% rise against the US Dollar. The Euro’s performance varied across other currencies, which is shown in the percentage change table. The heat map clearly illustrates these changes. It shows how the base currency in the left column compares to the quote currency in the top row. For example, the EUR/USD percentage change indicates how the Euro is performing against the Dollar. This time last year, in January 2025, a strong ZEW survey reflected a significant increase in investor confidence, which helped the Euro gain against the Dollar. Now, on January 20, 2026, we are looking for similar signs in a more complicated environment. The economic outlook this year is mixed. Recent Eurostat data shows that headline inflation has dropped to 2.3%, much closer to the European Central Bank’s target. However, industrial production figures from late 2025 reported a slight contraction of 0.2%, indicating some underlying weakness. This uncertainty may impact future interest rate decisions. Given this situation, our options strategy differs from 2025, when bullish call options on the Euro were favorable. With conflicting economic data, implied volatility on EUR/USD options is rising. Traders should consider strategies that can benefit from this volatility, like straddles or strangles, ahead of the next ECB meeting. Looking back, the Euro approached 1.10 against the Dollar after favorable data in early 2025. Currently, with EUR/USD around 1.0950, futures markets do not expect major rate cuts from the ECB, suggesting range-bound trading may dominate in the coming weeks. In contrast to the clear optimism seen in early 2025, traders are now focused on protecting against downside risk. Buying out-of-the-money put options on the Euro provides a cost-effective way to safeguard portfolios against unexpectedly weak growth data. This defensive stance marks a shift from the sentiment we observed last year.

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