Got a few more details:
at first, this is a problem in grep.exe (at least this one distributed with Geany, maybe other/better binaries are out there):

if I run the grep command on the cmd.exe, I also get the grep: ./??????: Invalid argument result. But in your screenshot you got those squares.

For futher testing, I created a directory with a German umlaut (lalelö).
Result in cmd.exe:

Result in Geany:

cmd.exe displays the folder name lalelö correctly but is not able to display correctly the UTF-8 encoded search result.

In Geany, the result is vice-versa: the folder name is displayed incorrectly but the UTF-8 parts are displayed properly.

So, related to #784, we probably need to convert the output from external commands back from UTF-16 to UTF-8. Though I doubt whether this can ever work properly if in the same output there is also UTF-8 encoded text. At least I have no idea how this could work.

For curiosity, I just tested grep.exe from the MSYS2 environment:

So yeah, MSYS2 grep.exe seems to work nicely with Geany.
@NTMan it would be cool if you could test the grep.exe in the archive at http://repo.msys2.org/msys/x86_64/grep-2.22-1-x86_64.pkg.tar.xz. This is exactly the same as I used for the last test (verified with md5sum). I'm not sure whether this binary is supposed to work without a MSYS2 environment and I cannot test this.

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