Eurozone’s M3 money supply rose by 3.3% in June compared to a year ago, which is slightly less than the expected 3.7%. This marks a decline from the previous rate of 3.9%. Loans to households increased by 2.2%, up from 2.0% in the earlier period. Loans to companies grew by 2.7%, an increase from 2.5%.

Data Released by the ECB

The European Central Bank released this data on July 25, 2025. It meets expectations in light of the ECB’s easing measures. We see this data as a sign of a continued slowdown in the Eurozone economy, even with a small rise in private loans. The lower money supply growth is a crucial indicator that earlier monetary tightening is still influencing the economy. This situation puts more pressure on the European Central Bank to adopt a more accommodating stance going forward. The recent HCOB Flash Eurozone PMI Composite Output Index has dropped to 49.5, making us cautious about equities. We suggest traders think about buying protective put options on the Euro Stoxx 50 index. This can help shield against a potential economic slowdown in the coming weeks.

Impact on Market Volatility and Strategy

This slow growth environment suggests that overall market volatility may remain low. Therefore, we see a chance to profit from strategies that benefit from stable or gradually declining markets, like selling out-of-the-money call spreads on broad indices. This is different from the high volatility seen during the 2022 energy crisis, indicating a new market situation is underway. The current figures support the need for monetary easing, which may lead to future rate cuts from the central bank. We are preparing for lower yields by using derivatives linked to German Bund futures. This strategy is reminiscent of actions taken from 2014 to 2016, when slow growth and disinflation prompted significant policy changes. If Frankfurt follows a more aggressive easing path while the US Federal Reserve keeps rates steady, this could lead to a policy divergence that weighs on the Euro. Additionally, the latest Eurostat data shows core inflation falling to 1.8%, further backing this currency strategy. Therefore, we find it wise to consider short positions on the Euro against the US dollar using futures or options. While Mr. Dellamotta points out that this single release is not immediately impactful on the market, we believe it serves as an important indicator of a wider trend. It strengthens the case for adopting a defensive stance on equities and suggests a weaker Euro. Create your live VT Markets account and start trading now.

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