Germany Is Once Again Saving Europe

EUR/JPY

Key zone: 180.00 - 181.00

Buy: 181.20 (after retesting the 180.50 level) ; target 183.00-183.50; StopLoss 180.60

Sell: 179.50 (on a pullback after retesting the 180.00 level) ; target 178.00; StopLoss 180.20

Current data show that Germany’s economy effectively did not grow in the third quarter. Against the backdrop of strong U.S. GDP dynamics, the result looks weak; however, compared with the recession of 2023–2024, the current recovery is already perceived as a positive signal. Germany is even creating conditions for a careful strengthening of the euro against the dollar.

• Exports and weak domestic demand remain the key limiting factors — pressure from U.S. tariffs and a weak external environment continue to drag the economy down.
• Investment in equipment and machinery showed positive dynamics, which partially supported GDP.
• Overall inflation in Germany has approached target levels, but persistent price pressure in the services sector and rising wages limit the room for accelerated rate cuts.
• Unemployment remains around 6.3% in September–October 2025, slightly above expectations.
• The ifo Business Climate Index rose to 88.4 in October from 87.7 in September — a one-year high in the expectations component, although current business assessments remain weak.
• The DAX index is trading near 23,000 points by the end of November, and the total return of the Global X DAX Germany ETF (2025 YTD) stands at +35–37%.

The war factor — an unexpected source of resilience

A noticeable rotation is taking place in the German stock market: some defense stocks are adjusting expectations after strong gains earlier in the year amid discussions of potential ceasefire scenarios in Ukraine.

German defense companies — Rheinmetall, Hensoldt, Airbus, Thyssenkrupp Marine Systems — are posting double-digit revenue growth, expanding margins, and forming multi-year order books thanks to the systemic increase in defense budgets across Europe.

The accumulated shortage of armaments does not disappear: a long-term, almost “guaranteed” demand base is being created for the German military-industrial complex, independent of the current phase of the conflict. Defense spending is becoming quasi-constant, and part of future revenue is already effectively secured through orders, including in cybersecurity.

The ruling coalition of Chancellor Merz forecasts German GDP growth accelerating from 0.2% in 2025 to 1.3% in 2026 and 1.4% in 2027. The government expects large-scale fiscal stimulus, but as the Bundesbank emphasizes, without structural reforms — improving business and investment conditions — sustainable acceleration will not occur.

At the same time, in Q3 and throughout 2025, the euro was far more tied to U.S. rate dynamics than to German macroeconomic data. The logic of “buying the euro against the dollar on corrections while political balance is maintained” remains valid, but it is extremely sensitive to Federal Reserve news.

For those avoiding excessive volatility, it makes sense to consider the euro in cross-pairs — the dynamics are calmer there, though the influence of the yen must be taken into account. Reminder: the next two days before the week’s close will pass without U.S. capital participation, and speculators will certainly take advantage of lower liquidity. This may lead to key zones shifting in a more positive direction for the euro at Monday’s market open.

So we act wisely and avoid unnecessary risks.

Profits to y’all!