Eurozone’s M3 money supply for June increased by 3.3% year-on-year, slightly below the expected 3.7%. This is a decrease from the previous 3.9%.
Loans to households rose by 2.2% compared to 2.0% in the previous period. Loans to companies showed a growth of 2.7%, up from 2.5%.
Data Released by the ECB
The data was released by the European Central Bank on 25 July 2025. It aligns with expectations amid the ECB’s easing measures.
We believe this data confirms a persistent slowdown in the Eurozone economy, regardless of the slight uptick in private loans. The miss on money supply growth is a key indicator that previous monetary tightening is still working through the system. This puts more pressure on the European Central Bank to be accommodative going forward.
With the latest HCOB Flash Eurozone PMI Composite Output Index recently dipping to 49.5, our view on equities is cautious. We believe traders should consider buying protective put options on the Euro Stoxx 50 index. This provides a hedge against a further economic slowdown in the coming weeks.
Impact on Market Volatility and Strategy
This environment of slow, grinding growth suggests that overall market volatility may remain subdued. Therefore, we see an opportunity in strategies that profit from stable or slowly declining markets, such as selling out-of-the-money call spreads on broad indices. This is a contrast to the high volatility seen during the 2022 energy crisis, suggesting a different market regime is now in place.
The figures reinforce the case for monetary easing, likely signaling future rate cuts from the central bank. We are positioning for lower yields by using derivatives tied to German Bund futures. This is similar to the playbook from 2014-2016, when sluggish growth and disinflation prompted significant policy action.
A more aggressive easing path from Frankfurt, especially while the US Federal Reserve holds rates steady, creates a policy divergence that should weigh on the currency. The latest data from Eurostat showing core inflation falling to 1.8% further supports this currency trade. Consequently, we see merit in establishing short positions on the Euro against the US dollar using futures or options.
While Mr. Dellamotta correctly states this single release is not immediately market-moving, we see it as a crucial piece of evidence confirming a broader trend. It solidifies the case for positioning portfolios defensively on equities and for a weaker Euro.
