UBS Chief Economist Paul Donovan reviews how AI might affect productivity and whether the EU could gain an edge over the US. He says AI-driven productivity gains are still mostly potential rather than realised.
He states that adopting new technology should, over time, improve economic efficiency. He also asks whether any economy could gain a competitive advantage as attention shifts from creating technology to using it.
He refers to academic work suggesting that if AI raises an individual’s productivity, it could boost low-skilled workers’ productivity proportionately more. He adds that if gains are uneven and mainly help workers with mid-level education, the US could be at a disadvantage compared with other major economies.
He argues that education systems and the spread of skills across workforces in the US, key European economies and the UK may shape how competitive each becomes as AI adoption grows. The article says it was produced with an AI tool and reviewed by an editor.
The market is shifting its focus from the theoretical potential of artificial intelligence to its real-world application. We are now questioning which economies have the right structure to actually use AI to boost efficiency. This suggests trading opportunities based on the educational makeup of different countries.
The United States may be at a disadvantage due to its polarized workforce, which has large numbers of high-skill and low-skill workers but a smaller middle. In contrast, key European economies, especially Germany, have a deep pool of mid-level skilled workers who are best positioned to have their productivity enhanced by AI. A late 2025 report from the OECD already noted early signs of this, with German manufacturing SMEs showing a 15% higher rate of AI tool integration for process optimization than their US counterparts.
For currency traders, this points to potential long-term strength in the euro relative to the U.S. dollar. Recent data from the first quarter of 2026 shows Eurozone labor productivity edging up by 0.4%, while U.S. productivity growth has flattened after its post-pandemic surge. We should consider buying EUR/USD call options or building long positions to capitalize on this emerging economic divergence.
This same logic applies to equity index derivatives, favoring European markets over the U.S. in the near term. While the S&P 500 has risen only 2% year-to-date, the German DAX index is up over 5%, reflecting strength in its industrial base as AI begins to streamline operations. A pair trade involving long DAX or Euro Stoxx 50 futures against short Nasdaq 100 futures could hedge against broad market moves while capturing this specific trend.
Uncertainty about the speed of AI adoption will likely create volatility, a lesson we learned from the sharp market corrections in 2025 when expected earnings failed to materialize quickly. The U.S. Bureau of Labor Statistics recently reported that while AI created new high-skill jobs, it has not yet translated into broad productivity gains across the service sector. This uncertainty suggests that buying VSTOXX futures or call options could be a prudent strategy to profit from expected swings in European market sentiment.
