The ZEW survey for January shows Germany’s current situation index at -72.7, beating expectations of -75.5. This indicates a slight improvement in how investors feel about Germany’s economy, though the index is still negative. The ZEW economic sentiment index is an important measure of investor views on Europe’s largest economy. The slight rise suggests investors might have a more positive outlook for the short term, despite ongoing geopolitical concerns and trade disputes.

Observing Economic Indicators

Market participants are carefully watching economic signals amid these geopolitical issues. Subscribing to FXStreet offers updates and expert insights on market events. The German ZEW survey indicates a current situation index of -72.7, which is better than expected but still very negative. This suggests that the extreme pessimism observed in the fourth quarter of 2025 may be leveling off. While this isn’t a sign to become overly optimistic, it could indicate a potential stabilization in European sentiment. This data gives the Euro a slight boost, especially as the “Sell America” trend continues. Last week’s December 2025 US retail sales figures showed an unexpected drop. We expect the EUR/USD pair to test resistance levels, and selling out-of-the-money puts on the Euro might be a way to profit, anticipating limited downside. With the European Central Bank likely to maintain its current stance, this provides some support. This newfound optimism for Germany could lead the DAX index to perform better than its European counterparts. Germany’s latest manufacturing PMI, while still contracting at 46.2, has shown improvement for three straight months, reinforcing this viewpoint. We are considering buying DAX call spreads to take advantage of potential gains while managing our risk against market weakness.

Market Fear Remains High

However, trade tensions and the situation in Greenland contribute to persistent market fear. Gold prices are heading toward new highs after surpassing $4,700, and we expect demand for safe havens to continue. Holding long positions in gold futures or options appears prudent as a hedge against ongoing geopolitical uncertainties. The VIX index remains stubbornly above 25, keeping option premiums high across the board. In this environment, strategies that sell volatility, such as iron condors on broad indices, could be appealing if you believe the market will stay within a certain range. Given the potential for sudden market moves, these positions should be managed with strict risk controls. Create your live VT Markets account and start trading now.

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