Growth in the US is seen as much more robust, and there is skepticism about an improvement in the German economy, and it has become increasingly clear that markets are somewhat critical of the expectation of a stronger EUR/USD over the coming months, Commerzbank's FX analyst Volkmar Baur notes.

Germany’s investment gap widens

"Firstly, much of the lower growth in Germany in recent years is due to lower investment. While the share of private investment excluding residential real estate in Germany's gross domestic product was higher than in the US until 2012, it has been lower since the euro crisis. The chart below left shows that between 2015 and 2019, the share was already lower than in the US, but at least still showed a certain degree of parallelism. Since the pandemic, and especially since Russia's war of aggression against Ukraine, this picture has changed significantly. While the share of investment in GDP continues to rise in the US, it is falling in Germany."

"This is precisely why the German government's fiscal package is so important for the coming year. The share of investment in GDP would finally rise again. In 2027, it could reach 11.5%, an increase of 0.5 percentage points from the current 11.0%. And second: A detailed look at the US investments shows that the increase there over the last year and a half is actually almost exclusively attributable to the IT sector. In other areas, such as industrial equipment or transport, there is no growth in investment at all."

"If this difference in investment narrows again, there is also hope that Germany's potential growth (and hopefully that of the eurozone) will improve again and that the gap with the US can be closed somewhat. This would structurally strengthen the euro against the US Dollar. And we expect to see the first signs of this happening next year. This is not our only argument for a euro appreciation in 2026, but it should help."