German bunds rally ahead of UK PM May’s Brexit speech; ECB policy decision in focus

The German bunds gained Tuesday, following renewed fears of a hard Brexit and in the run up to the United Kingdom Prime Minister Theresa May’s speech, scheduled for today. Also, investors are curiously eyeing the European Central Bank’s (ECB) first monetary policy of 2017, scheduled to be held on January 19.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell over 3-1/2 basis points to 0.29 percent, the long-term 30-year bond yields also plunged 5-1/2 basis points to 1.02 percent and the yield on short-term 2-year bond slid 1/2 basis point to -0.74 percent by 09:15 GMT.

Further, UK PM Theresa May's Brexit speech, scheduled to be later today by 11:45 GMT. We expect that she will lay out plan to exit the European Union that would see Britain losing access to the bloc's single market. However, it may be barely surprising that the PM wants to quit the common market.

Moreover, the ECB is widely expected to end in the decision to maintain the status quo on monetary policy. Also, the tone of the accompanying press conference given by President Mario Draghi should similar to that of the previous month.

Lastly, the final December HICP data for both Germany and the Eurozone are due and should be confirmed at their respective preliminary readings. Eurozone external trade figures for Nov are likely to reveal healthy surpluses on both the merchandise trade and current account balances, and German Dec PPI data should reveal the extent to which pipeline cost pressures have been bearing up on overall inflation.

Meanwhile, the German stock index DAX Index traded 0.65 percent down at 11,480 by 09:20 GMT, while at 9:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -3.11 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex