FX.co ★ Bund Yields Steady as Fed Caution Keeps Markets on Edge

German 10-year Bund yields remained steady at 2.74%, hovering near their highest point since September 3rd. This stability in European bonds mirrored a similar cautious tone observed in US Treasuries after Federal Reserve Chair Jerome Powell reiterated a careful approach towards future interest rate decisions. The central bank continues to consider ongoing inflation pressures exacerbated by tariffs against indicators of a weakening labor market. Currently, money markets are pricing in over a 90% probability of a Federal Reserve rate cut in October, with investors keenly anticipating the US PCE price index release on Friday for additional guidance. In Europe, the sentiment was mixed. The HCOB PMI survey revealed Germany's fastest private-sector expansion since May 2024, bolstered by robust service sectors, although manufacturing experienced a sharper than anticipated contraction. Meanwhile, geopolitical tensions have escalated following US President Trump's expression of confidence in Ukraine's ability to reclaim all its Russian-occupied territories.