EUR/USD: Germany is out of the woods, thanks to positive public procurement figures

While the latest macroeconomic statistics suggest a prolonged pause in the Fed's monetary easing program, the dollar stopped losing ground against a euro supported by a renewed appetite for risk, fueled by Nvidia's quarterly results - which, however, failed to significantly excite Wall Street - and by confirmation that Germany, the Eurozone's largest economy, was finally emerging from its economic slump.

"The second estimate of German GDP for Q4 2025 confirms the return to growth (+0.3% quarter-on-quarter) and, above all, that this growth is driven by domestic demand, particularly public demand," note strategists at LBPAM, who interpret these positive figures as follows:

"Following the sharp increase in public spending at the end of 2025, this confirms that German fiscal policy is beginning to strongly support growth. And the January budget data indicates that this will continue into early 2026. We continue to anticipate that the German government will execute a large part of its very ambitious investment plan in defense and infrastructure, which supports our more positive-than-consensus scenario for growth in Germany and the eurozone over the next two years."

These concrete figures were preceded by the latest Sentix surveys and the latest Ifo index of investor and consumer confidence in the German economy.

The Sentix Institute's press release at the beginning of the month provided the following insights:

"Germany continues to surprise on the economic front. New orders in German industry have recently astonished investors, who are impressed by the latest survey. Institutional investors, in particular, are significantly revising their forecasts, leading to a sharp rise in economic expectations. In the main index, this translates into a jump of nearly 10 points, to +16.2 points. This could signal the end of the recessionary phase for the German economy. The widely discussed gas shortage, despite German storage capacity being at its lowest historical level for this time of year, is not perceived as a major obstacle by the investors surveyed."

On the US macroeconomic front, yesterday's weekly jobless claims, still hovering near the 200,000 mark, further illustrated, if any further proof were needed, the resilience of private-sector employment in the US. Currently, the probability of a federal interest rate cut in March following the next FOMC meeting is virtually nil (less than 3%), according to the CME Group's FedWatch tool.

Right now, the EUR/USD is trading at $1.1799.

KEY TECHNICAL ELEMENTS:
The Chadburn line has repositioned itself on "Standby," as the 20-day moving average (dark blue line) failed to provide the necessary support, leaving the door open for a long consolidation towards the 200-day moving average (brown line). This underlying trend line, while still bullish, is gradually losing momentum. Currently, the currency pair is attempting to find support at a pivot zone identified at $1.1765.

MEDIUM-TERM FORECAST
Based on the key technical factors mentioned above, our medium-term outlook for the EUR/USD is neutral.

We will maintain this neutral outlook as long as the EUR/USD remains between the support level at $1.1765 and the resistance level at $1.1935.