Money Markets - June 2025
Markets, macro, and momentum.
“To improve is to change, to be perfect is to change often”—Winston Churchill
Welcome to AlphaPicks’ monthly market update, a rundown of global markets for the coming weeks in around ten minutes.
Here’s what you need to know…
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Macro
The trading and investing landscape for May can be best described as ‘macro whiplash’. The almost constant change in trade policy out of the US made it difficult to try and have a clear conviction, with being nimble yet again serving as the best tactic for many.
We entered the month with more optimism of trade resolutions between the US and key trading partners such as China and the EU. Progress was made to some extent, although the erratic nature has made any correspondence out from the administration incredibly unreliable.
A good example of this was with the EU, with the imposition of 50% tariffs, then becoming an extra month extension of talks, to outright positive discussions. Related asset price moves in EUR/USD and in equity indices can be seen below:
It’s clear that Trump is now no longer just fighting the trade war with external parties, but even within his own justice system. This provided another case of the whiplash we refer to.
Earlier this week, the US Court of International Trade ruled that the administration had improperly imposed wide-ranging tariffs on dozens of US trading partners, declaring the legal justification for the levies under the 1977 International Emergency Economic Powers Act (IEEPA) invalid.
Yet in a reversal on Thursday, a federal appeals court issued a temporary stay, pausing the trade court’s ruling while considering a longer-lasting hold on the decision.
Looking forward, it’s unlikely the situation will improve anytime soon, and the assumption that the market will become more accustomed and less volatile to these headlines is only partially valid. Structuring VIX higher plays for the coming 0-3 months can provide attractive payoffs.
When trying to get a feel for the health of the US consumer, the UofM Consumer Sentiment Index held steady at 52.2 in May, matching April's reading. While the temporary reduction in tariffs eased some inflation concerns, 64% of consumers still anticipate deteriorating economic conditions over the next year
In the Eurozone, inflation prints steadied, with Spain at 2.2%, Germany at 2.1%, Italy at 1.7%, and France dropping to just 0.8%.
This has bolstered expectations for another interest rate cut from the ECB, potentially the eighth since June 2024. Easing wage pressures, a stronger euro, and falling energy costs contributed to the slowdown, giving the ECB more room to support growth without risking overheating.
The UK presented a more complex picture. The Bank of England cut interest rates to 4.25%, even as April inflation rose unexpectedly to 3.5%, well above its 2% target. The monetary policy decision was anything but a clear call. The 5-4 call wasn’t even the main eyebrow raiser, but rather the fact that of the four dissenters, Swati Dhingra and Alan Taylor advocated for a larger 0.5% cut to 4.0%. In contrast, Catherine Mann and Huw Pill preferred maintaining the rate at 4.5%.
Policymakers expressed interesting views, with MPC member Alan Taylor arguing that the spike was due to temporary effects like higher utility bills and council tax changes, and not a reason to pause the easing cycle.
Catherine Mann expressed concerns over “greedflation,” where companies raise prices beyond cost increases to rebuild profit margins, which will likely see her continue to vote to keep rates on hold.
FX
Thoughts from guest contributor Alexie (@Viraelum) on FX ideas for the month ahead:
Trade 1: EURUSD 12-Month 1.29/1.05/0.95 Seagull Structure: Long 12M 1.05 put, short 12M 1.29 call, short 12M 0.95 put; zero-cost ±15 bp vol. Target 0.97, hard stop 1.13.
Rationale: ECB–Fed rate gap poised to widen; EUR downside skew trades 0.8 vols cheap to 5-yr median. Seagull monetises muted right-tail, maintains convexity to structural EUR depreciation as it evolves into primary funding currency. Risk: Euro-area wage-price spiral forces ECB to guide deposit rate back to 3.25 %, steepening 1y1y €STR by 90 bp and driving EURUSD through 1.13.
Trade 2: USDJPY 6-month Broken-Wing Put Fly 149/144.5/139. Long 1× 149 put, short 2× 144.5 puts, long 1× 139 put.
It pays out if spot settles in the 140.5-148.5 range, with maximum profit at 144.5; any additional yen strength only incurs the limited loss built into the structure.
Rationale: 6M implieds trade 1.4 vols rich to 12M after recent front-end hedging demand; calendar flattener captures relative skew normalisation while retaining long-dated vega for 2025-2026 yen strength. Carry drag contained; theta on short leg funds 65 % of long-leg decay. Risk: Compression of longer-dated vols; exit if 12M-6M vol spread narrows below 0.5 vol.
Thoughts from AlphaPicks on CHF
After rebounding from April lows just above 0.8000, USD/CHF continued to trade with downside pressure, with both the USD leg struggling to catch a bid and CHF continuing to be well supported by haven buyers.
The next SNB meeting is scheduled for the 19th June, with rates pricing finely balanced between a 25bps and a jumbo 50bps at 31.5bps.
We feel the SNB will be keen to try and weaken the Franc, especially given the lack of corrective moves over the past couple of weeks following the April surge. Of course, some of the rationale behind a larger cut can be justified via data, with April headline CPI falling to 0%:
This provides more of a get-out-of-jail-free card for the SNB to play in loosening monetary policy at a faster pace than is currently priced. This is likely one of the few ways to induce some CHF weakness.
It’ll be interesting to see how June pans out for related CHF crosses and whether SNB actions, or even a risk-on bid and use of CHF as a funding currency (more attractive with lower…even potentially negative rates) can help to release the pressure valve. If not, then the next real downside test is a break of 0.8000—something we haven’t seen since 2011:
