The European Central Bank (ECB) shared that the Eurozone’s M3 money supply grew by 3.4% in July 2025. This was just below the expected 3.5% increase compared to the same time last year. It’s an uptick from June’s rate of 3.3%. Overall, the Eurozone’s broad money supply has remained stable, showing an average growth of 3.5% over the three months leading up to July. Since the ECB is currently not changing its policies, future growth in the money supply may be more modest.

The European Central Bank’s Decision

With July’s M3 money supply being slightly lower, this supports the ECB’s choice to pause any changes. The data shows that while money growth is stable, it’s not speeding up, reducing any need for the ECB to consider raising rates soon. For traders in derivatives, this lowers expectations for any unexpected aggressive moves shortly. This steady money supply data fits into the larger economic picture we’ve been observing. The Eurozone’s GDP growth for Q2 2025 was only 0.1%, and although July’s inflation decreased to 2.7%, it still remains above the central bank’s target. This mix of a slowing economy and ongoing inflation puts the ECB in a tough spot, making it likely that interest rates will stay the same for a while. In this context, implied volatility for European assets might decrease in the upcoming weeks. Selling short-term call options on the Euro Stoxx 50 could be wise as the market adjusts to this steady information and the VSTOXX index could fall from its current level around 14. Without a clear trigger, big increases in stock prices seem unlikely for now.

Interest Rate Traders Strategy

Interest rate traders should focus on the longer term. While short-term contracts are likely to stay stable, we can explore options that speculate on a possible policy shift in 2026. Reflecting on the market fluctuations in late 2024 after the last rate hike, it became clear that waiting was essential, and markets did not reward bets on immediate rate cuts. This situation is reminiscent of the “wait-and-see” phase we went through last year. Range-trading strategies on the EUR/USD, like selling strangles, could be effective since the currency may not have a strong directional trend. We should expect the euro to stay within its recent range until we get clearer signals about inflation or growth. Create your live VT Markets account and start trading now.

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