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ABN AMRO forecasts a rebound in Eurozone and German industrial production driven by recovering domestic demand and increased defense-related activity in Germany. However, the firm anticipates a decline in German factory orders following strong performance in late 2025. The analysis highlights the dual impact of domestic economic resilience and geopolitical factors, such as defense spending, on manufacturing trends. Energy price volatility remains a critical risk, potentially undermining recovery momentum. For traders, this outlook suggests cautious positioning in EUR/USD and European equities, as manufacturing data could influence ECB policy decisions. Investors should monitor upcoming factory orders and energy market developments for directional clues. The interplay between defense-driven demand and energy costs will likely shape the region's industrial output trajectory in the coming quarters.
