Germany’s business sentiment strengthened in February, reinforcing signs that the domestic economy is gaining solid momentum. The Euro FX Futures (6E) firmed up on Monday following the data but has since given the gains.
German Economy Chugging Along: The Ifo Institute’s survey showed that the Ifo Business Climate Index climbed a point to 88.6 in February, with the headline number exceeding economists’ expectation of 88.4. This marked the highest reading since Aug. 2025.
Source: Ifo
The current business situation index also moved up a point to 86.7, exceeding the 86.1 consensus, and the expectations index rose 0.9 points to 90.5, the highest since Aug. 2025 and aligning with expectations.
The results are based on a survey of about 9,000 respondents by Munich-based Ifo Institute.
Composite purchasing managers’ index released by S&P Global last , reflecting activity in the German private sector, showed an acceleration to a four-month high in February. While services sector activity improved, the manufacturing sector expanded for the first time in 44 months.
Economists Upbeat: The Ifo reading confirms that the German economy is in the middle of a cyclical upswing, said ING economists. “It is a cyclical upswing on the back of fiscal spending on defence and infrastructure, and it is a cyclical upswing that is currently illustrated by improving order books and dropping inventories.”
The economists, however, flagged downside risks such as the renewed tariff uncertainty, a stronger euro and the recent winter weather.
Where’s 6E Headed? The Euro FX futures have been moving sideways since June last, and trades off a four-high past the 1.20 mark, which it reached in late January. If the derivative instrument gathers some momentum, it could face resistance around the 1.187 level. A break above the level could keep the 6E on track to retest the $1.20 psychological resistance.
On the downside, the 6E has strong support around the 1.18 level and the 1.167 levels.
Source: TradingView
Given the strengthening case for an extended pause by the Federal Reserve and the likelihood of the European Central Bank cutting rates again, the Euro FX futures could come under pressure in the near to medium term.
It would be advisable to go long on the derivative instrument only on a sustained break above 1.187, with a potential stop loss at 1.180. But a short strategy seems appropriate if it fails to clear 1.187.
Traders should closely monitor incoming U.S. inflation and Eurozone growth data for confirmation of the policy divergence theme, which remains the primary macro driver for 6E positioning.
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