German bunds rebound after ECB's Rimsevics express QE disappointment

The German bunds rebounded Wednesday after the European Central Bank’s (ECB) governing council member Latvia's Ilmars said that the central bank’s Quantitative Easing (QE) has failed to push growth in the Eurozone area.

We foresee that the bund prices will keep drifting between small gains and losses in quiet trading due to a long global Christmas holidays.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell more than 2 basis points to 0.24 percent, the long-term 30-year bond yield dipped 3 basis points to 0.964 percent and the yield on short-term 2-year bond slid 1/2 basis point to -0.78 percent by 09:00 GMT.

Rimsevics, Latvia's central bank governor, blamed a lack of progress on economic reform and on the European Commission's stimulus package for curbing confidence and lending despite the ECB's massive injection of cash since 2015, Reuters reported.

The ECB has extended its bond-buying scheme until the end of 2017 saying it was yet to be convinced that inflation was heading to its target of almost 2 percent, they added.

On Monday, the Federal Reserve Chair Janet Yellen commented that the United States is now seeing its strongest labour market in nearly a decade as job creation has continued at a relatively steady pace. Also added that she has seen signs of wage growth improving and that weekly earnings for younger workers are making strong gains.

Moreover, the Federal Open Market Committee increased the fed funds rate to a 0.50-0.75 percent range last Wednesday, as widely expected. The statement noted that information received since the November meeting indicates that the labour market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year.

Also, the new projections showed that the central bankers expect three quarter-point rate increases in 2017, up from the two seen in the previous forecasts in September, based on median estimates.

Lastly, markets will remain keen to focus on the upcoming economic data and events, highlighted by ECB economic bulletin and GfK German consumer climate.

Meanwhile, the German stock index DAX Index traded flat at 11,469 by 09:10 GMT. While at 09:00 GMT, the FxWirePro's Hourly Euro Strength Index stood neutral at -25.18 (lower than -75 represents a bearish trend).