Insights 
VT 
In May, investor sentiment in the Eurozone improved, with the Sentix Investor Confidence Index rising to -8.1 from April’s -19.5, according to the latest survey. The Current Situation gauge also saw a rise, unexpectedly increasing to -19.3.
The survey indicated that concerns about a recession have diminished. The sentiment reflects the effects of specific international policies on the economies of the US, China, and Switzerland.
Despite the positive sentiment data, the EUR/USD currency pair maintained stability. It remained above 1.1300, trading 0.25% higher on the day at around 1.1325.
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Investor confidence across the Eurozone showed a credible recovery through May, as shown by the Sentix Index moving notably higher from April’s depressed levels. The momentum shift is underscored by rising views on the current economic situation, which—though still negative—moved unexpectedly upwards, pointing to a more resilient backdrop than previously anticipated.
What does this mean in practice? Essentially, investors are feeling less anxious about the onset of a formal recession in the near term. Much of this renewed optimism likely stems not from domestic strength alone, but from global policy adjustments filtering through from economies like the US and China. These adjustments are no longer perceived as threats; if anything, they provide some cushion to sentiment on the continent.
In spite of this backdrop, the euro itself stayed relatively grounded in terms of valuation. It managed to hold its position above the 1.1300 level against the dollar – modestly higher on the day at 1.1325, reflecting only a mild response from currency markets so far. This may suggest that the FX side is looking for firmer data before re-pricing in another direction.
Brokers, while often overlooked in broader macro discussions, remain key. Pricing, execution quality, and regulatory protections can vary meaningfully across providers. For our own positioning, it’s not simply about having access to trading—it’s about ensuring that inefficiencies aren’t silently eating into potential gains.
Managing Market Uncertainties
While the outlook looks less bleak than it did a few months ago, volatility has not disappeared—it’s simply changed form. What we’re seeing now is an environment where expectations are being continuously tested, where both upside and downside surprises remain in play. It’s exactly this kind of setting where derivatives become not only useful but necessary as a hedge or speculative vehicle.
From our side, we’ll be treating short-term signals with more scrutiny than usual. The jump in sentiment does not always align directly with forward-looking indicators. Options premiums may remain inflated for sectors seen as vulnerable to surprise downside, whereas more cyclical names might see tightening spreads if this mood of cautious optimism continues.
The inflation picture, interest rate expectations, and upcoming PMI data due later in the month should be monitored with greater rigour. Although there’s a gentler tone underpinning market assumptions now, it only takes one disappointing release to put volatility back on the table. We should not underestimate how quickly sentiment can reverse, especially when it has only just begun to recover from multi-year lows.
Rather than reacting aggressively to each data point, we’ll be managing positioning around clear trend confirmation. Momentum strategies may struggle without stronger directional cues, while sellers of volatility might find short-lived opportunities if realised volatility continues to underperform implied levels.
Those with leveraged exposure should be especially alert. Margin calls do not wait for markets to explain themselves politely. We’re watching implied vol levels across short-dated instruments for signs of stress or relief, as they provide early signals before the broader market narrative catches up. Constant reassessment remains essential—standing still is not an option.
Instruments tied to FX volatility, rate-sensitive derivatives, and cross-asset correlation plays offer some symmetry to what remains a risk-balanced picture. Directional trades without buffers may not be ideal right now; instead, a focus on ratio spreads, risk-reversals, and conditional probability plays is likely to reward the diligent.
As always, the numbers speak, but it’s the structure behind them that tells us how to act. Keeping an eye trained on both is where our edge will stay sharp.
