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Trade balance in the euro area already recorded a deficit of €1.0 billion (revised) in January, but at least returned to a surplus in February with an estimate of €11.5 billion. This improvement was primarily driven by the machinery and vehicles sector, where the surplus rose from €1.5 bn in January 2026 to €10.2 bn in February.But considering the fact that surging energy prices will be a factor starting from the March report, this latest one for February is not relevant whatsoever anymore. The euro area imports roughly 60% of its energy requirements and as such, we will observe a big terms-of-trade shock in the data next month.For some context, the trade balance in the euro area typically keeps at a surplus but ran a massive deficit for a prolonged period of time in during the Russia-Ukraine conflict. And this looks set to be a repeat of that.The massive widening in the energy deficit can be a big problem, especially if oil and gas prices keep higher for a sustained period of time. That will in turn weigh more heavily on the economic performance in the euro area region.So while the energy deficit widening is the main thing to watch out, there could be a secondary impact on manufacturing too. When energy prices surge higher, it will eventually see energy-intensive production become too expensive. And that will also narrow the trade surplus from the chemicals sector for example.For some backdrop, chemicals and related products have always been producing the biggest trade surplus margin for the region. In February, it recorded a surplus of €16.2 billion. Trouble, trouble.
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
The euro area’s trade balance swinging from a deficit to a surplus is a key indicator for traders right now. This shift, moving from a €1.0 billion deficit in January to an estimated €11.5 billion surplus in February, signals potential strength in the eurozone economy. The machinery and vehicles sector is driving this change, which could bolster the euro against other currencies, especially if this trend continues. Traders should keep an eye on how this impacts the euro against the dollar, particularly if the euro strengthens above key resistance levels. If the euro can hold above recent highs, it may attract more bullish sentiment. However, it’s worth noting that this improvement could be temporary if global demand falters or if supply chain issues resurface. The real story is whether this surplus can be sustained in the coming months, especially as inflation and interest rates remain in focus. Watch for upcoming economic data releases that could either confirm or challenge this positive trend.
📮 Takeaway
Keep an eye on the euro’s performance against the dollar; a sustained surplus could push it above key resistance levels, impacting trading strategies.
