Olaf Sleijpen, a policymaker at the European Central Bank (ECB), said at an event organised by the European Economics & Financial Center (EEFC) in London on Wednesday that a repeat of the Eurozone’s 2022 inflation spike looks less likely, though it cannot be ruled out. He framed the outlook as improved compared with 2022, but still subject to renewed price pressures.
For Eurozone monetary policy, Sleijpen pointed to the risk of second-round effects as the central concern. He said market expectations imply a downward trajectory for oil prices, while adding that uncertainty around that path remains.
Positioning For Interest Rate Volatility Amid Persistent Inflation Risks
Given that a repeat of 2022’s inflation problems cannot be fully excluded, we see an opportunity in interest rate volatility. The latest May 2026 Eurozone core inflation print remains sticky at 2.8%, well above the central bank’s target. Therefore, we are considering buying options on short-term EURIBOR futures to protect against a sudden hawkish shift from policymakers.
The primary issue for monetary policy is the risk of second-round effects, particularly from wages. With Eurostat data showing negotiated wage growth holding firm at 4.2% in the first quarter of 2026, we believe the market is too complacent. We are positioning for the European Central Bank to hold rates higher for longer than the single 25-basis-point cut currently priced in for the rest of the year.
Strategic Trades On Energy Prices And The Euro
Market expectations may point to a declining path for oil prices, but significant uncertainty remains due to ongoing supply chain concerns. We saw how quickly Brent crude prices spiked over 30% in a single month during the 2022 crisis. To capitalize on this uncertainty, we are purchasing long-dated straddles on crude oil futures, which will profit from a large price move in either direction.
This cautious outlook also has implications for the currency market, where the EUR/USD has been trading in a tight range around 1.09. If the ECB is forced to adopt a more hawkish tone than the U.S. Federal Reserve, the interest rate differential would favor the Euro. Consequently, we are looking at call options on the EUR/USD pair as a low-cost way to position for potential upside in the coming weeks.
