FX.co ★ Bund Yields Tick Higher, but ECB Outlook Weighs

Germany’s 10-year Bund yield rose to 2.95%, a near two-week high, mirroring the move in US Treasury yields as investors positioned ahead of US employment data due later in the day. The upside, however, was capped by weaker-than-expected Eurozone inflation figures and a scaling back of expectations for aggressive ECB rate hikes this year. Data released on Wednesday showed that both headline and core inflation fell more than anticipated in June, to 2.8% and 2.4%, respectively.

Speaking at the ECB’s Sintra Forum, President Christine Lagarde told CNBC that the risks to both inflation and growth in the euro area are now more evenly balanced than they were a few weeks ago, citing the recent decline in oil prices. This reassessment comes after the ECB became the first G7 central bank to raise interest rates following the onset of the Iran war three weeks earlier, a move driven by concern that inflation pressures were becoming more broad-based. Since then, oil prices have dropped sharply on renewed hopes for US–Iran peace, with Qatar set to host the next round of indirect talks soon.