FX.co ★ German Bund Yields Climb Amid Oil Price Surge and Policy Uncertainty

The yield on Germany's 10-year Bund has climbed beyond 2.55%, marking its highest point since June 9, as investors consider the potential inflationary effects stemming from a surge in oil prices. Simultaneously, they are anticipating the US Federal Reserve's upcoming policy decision this week. Oil prices have surged to nearly five-month peaks, fueled by increased tensions between Israel and Iran and rising concerns about potential supply interruptions should the Strait of Hormuz be closed. On the policy spectrum, the Federal Reserve is anticipated to maintain its current interest rates unchanged on Wednesday, with the focus shifting to updated economic projections and the much-observed dot plot. In Europe, money markets are predicting the European Central Bank's deposit facility rate to be at 1.79% by December, with the likelihood of a rate reduction in September falling to 50%, down from a previous 60%. ECB policymaker Joachim Nagel highlighted the critical need for adaptability, pointing to the "exceptional uncertainty" within the economic outlook.