Eurostat released new data on July 15, 2025, showing a 1.7% increase in Eurozone industrial production for May. This is higher than the expected 0.9% rise. The previous figure was adjusted from -2.4% to -2.2%. Energy production skyrocketed by 3.7%, making a big contribution to the gain. Excluding energy, capital goods output rose by 2.7%, and non-durable consumer goods jumped by 8.5% month-on-month.

Industrial Production Breakdown

However, these overall gains were tempered by declines in other areas. Intermediate goods fell by 1.7%, and durable consumer goods decreased by 1.9%. At first glance, Eurostat’s report seems promising, but relying solely on this headline figure would be a mistake. This positive news is misleading, as it masks deeper issues in the economy. For those trading derivatives, the best approach in the coming weeks is not to chase this surface strength, but rather to prepare for the rising uncertainty it reveals. The heart of the problem lies in the details. A spike in energy production is not a sign of a strong economy driven by demand; it often reflects supply-side changes and geopolitical pressures. The increase in non-durable goods suggests consumers are spending defensively on essentials rather than confidently purchasing larger items. The troubling part is the decrease in intermediate and durable goods. When factories order fewer components and consumers delay buying cars and appliances, it shows a significant weakness in the economy. This is supported by data from Germany’s Federal Statistical Office, which revealed a surprising 0.6% drop in factory orders last month, contrary to expectations of a slight rise. This creates a challenging situation for Lagarde. With the ECB’s main refinancing rate at 4.75% and core inflation stubbornly around 3.9%, this strong headline number gives her the political backing to stay hawkish. However, the underlying weakness indicates that additional rate hikes could push the economy into a recession. We’ve seen this happen before. Think back to 2011-2012 when the ECB raised rates amid a slowing economy, which worsened the sovereign debt crisis. The market is now wary of a potential policy mistake.

Market Strategy

Our strategy is twofold. First, we are purchasing volatility. The mixed data will create uncertainty and indecision. A long straddle on the Euro Stoxx 50 Index for the next 45 to 60 days looks appealing, as it will benefit from major movement in either direction. Second, we are initiating relative value positions based on the report’s disparities. This involves exploring put options on consumer discretionary stocks, especially German automakers sensitive to declining durable goods orders, while also considering call options on European energy companies benefiting from the reported production trends. For currency trading, any immediate jump in the EUR/USD after the headline number should be treated as a chance to sell. We plan to fade any rise above 1.0950, likely by buying near-term put spreads. While the market currently rewards those focused on headlines, the real gains will come from understanding the underlying reality. The upcoming flash PMI data will be vital; we believe it will reveal the fragility hidden within today’s figures. Create your live VT Markets account and start trading now.

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