The eurozone trade balance, not seasonally adjusted, was €11.5 billion in February. This was below the expected €11.7 billion.
The reported figure was €0.2 billion lower than the forecast. The data refers to February and is presented on a non-seasonally adjusted basis.
The February trade surplus coming in below expectations at €11.5 billion signals a slight headwind for the Euro. Given this, we see potential in strategies that bet against a significant rally in the currency. Selling out-of-the-money EUR call options for the coming weeks seems prudent.
This data point reinforces the recent manufacturing PMI figures for March which, according to S&P Global, showed a contraction at 49.5, indicating a sluggish industrial sector. This weaker export signal is particularly concerning for German equities, heavily reliant on global trade. Therefore, we are considering protective puts on the DAX index as a hedge against a potential slowdown.
We are reminded of a similar pattern in late 2025, when weakening external demand preceded a dip in the Euro Stoxx 50 index. That period saw implied volatility, as measured by the VSTOXX index which averaged around 18, spike higher before the equity market fell. Based on that experience, buying calls on the VSTOXX could be an effective way to position for market choppiness.
This string of softer economic data, including the recent March inflation print that came in cooler than expected at 2.1%, reinforces the view that the European Central Bank may have to ease policy. As a result, we expect front-end interest rate futures to continue to price in higher probabilities of a rate cut. Positioning in Euribor futures could reflect these expectations for a more dovish ECB by this summer.
