Industrial Activity Remains Flat
Industrial production decreased by 0.5% in January versus the previous month. This matches the lack of evidence for a near-term rise in activity. The data suggest the industrial sector is stable but not yet improving. As a result, it is unlikely to add to German economic growth in the first quarter, with real GDP expected to rise only slightly at best. The newest figures for January 2026 show German industrial orders have fallen sharply, a pattern of weakness that reminds us of the struggles we saw throughout 2025. The core data, which ignores large and volatile contracts, shows the trend is still just moving sideways. This suggests that while the industrial sector has stopped getting worse, it is not yet getting better. Given this lack of an upward push, the German DAX stock index looks exposed near its recent highs of around 19,500. We should view this as an opportunity to buy put options on the DAX or on related ETFs. This provides a clear, risk-defined way to position for a potential market downturn in the coming weeks.Currency And Rates Implications
This weakness in the Eurozone’s largest economy also creates a currency opportunity, especially when compared to the United States. The most recent US jobs report showed the economy added a solid 250,000 jobs, creating a clear economic divergence with Germany. This makes shorting the EUR/USD currency pair an attractive strategy. The data points to stabilization rather than a dramatic fall, suggesting a range-bound market may persist for now. With the VDAX-NEW volatility index sitting at a low level of 14, this is an ideal environment for selling options premium. We believe strategies like an iron condor on the DAX index could perform well, profiting from a lack of large price swings. This continued industrial stagnation puts more pressure on the European Central Bank to take action later this year. While the market is not fully pricing in a rate cut from the current 3.75% level before the third quarter, this weak data could shift expectations. We see this as a good time to be long German 10-year Bund futures, which would benefit from any increase in rate cut speculation. Create your live VT Markets account and start trading now.
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