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Interest rates: the ugly dilemma facing Europe’s central banks – and why it’s a mistake to cut too soon 
The German bunds rallied on Wednesday as investors await for Federal Reserve’s monetary policy meeting and Federal Reserve Chair Janet Yellen’s speech in an attempt to estimate the Fed's likely next step to raise interest rate. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved down 2.33 pct to 0.294 pct and the yield on the 2-year bonds fell 0.62 pct to -0.488 pct by 0900 GMT.
Today, the U.S. Federal Reserve will announce its policy decision at 1800 GMT; markets largely expect that interest rates will be kept steady with a slim possibility of a surprise hike. Moreover, focus will be on the press statement and whether there is a shift across the Fed members to a more hawkish stance. Even subtle changes in the wording of its statement will tell us a lot about the probability of a June hike. Recent comments have been far more hawkish than the market is currently pricing in on rates.
On the other hand, investors did not react to the firm May consumer confidence, which rose to 9.7, higher than the market expectation of 9.4, from 9.4. On Monday, the Germany IFO business climate rose to 106.6 in April, lower than market expectation of 107.1, from 106.7 in March.
Moreover, the German bonds have been closely following developments in oil markets because of their impact on inflation expectations and stocks prices. Today, crude oil prices rose by tracking weak greenback and strong investor sentiment. Meanwhile, Crude oil prices continue to rover near to 2015 high. WTI was further supported after the American Petroleum Institute (API) reported a draw of almost 1.1 million barrels in U.S. crude inventories a week ago versus markets desires for a 2.4 million-barrel build in a Reuters survey. The International benchmark Brent futures rose 2.13 pct to $46.54 and West Texas Intermediate (WTI) climbed 1.77 pct to $44.82 by 0900 GMT.
The markets in the Germany will now focus on a greater flow of economic data throughout the week, unemployment change on Thursday (0755 GMT), Consumer Price Index (CPI) at (1200 GMT) and retail sales on Friday (0600 GMT). The investors will also look forward to FOMC meeting on Wednesday, 27th April.
Meanwhile, the German stock index DAX Index rose 0.05 pct at 10,264.5 by 0900 GMT.
