German bunds suffer ahead of July manufacturing PMI, ECB’s interest rate decision

The German bund prices suffered Monday ahead of the country’s manufacturing PMI for the month of July, scheduled to be released on July 24 by 07:30GMT. However, of utmost importance is the European Central Bank’s (ECB) monetary policy decision, due to be unveiled on July 26 by 11:45GMT.

The German 10-year bond yields, which move inversely to its price, rose 1 basis point to 0.38 percent, the yield on 30-year note also edged higher by 1 basis point to 1.04 percent and the yield on short-term 3-year traded tad higher at -0.49 percent by 09:50GMT.

This week’s ECB monetary policy meeting will be the first since the agreement last month to end its net asset purchases by the end of the year and issue new forward guidance on interest-rate and reinvestment policy. No significant news is expected to emerge, with President Mario Draghi likely to stick very much to the language agreed in June despite the continued soft tone to the recent economic data, Daiwa Capital Markets reported.

Data-wise, this week will be a busy one, dominated by economic survey results, but with the first GDP numbers for Q2 also scheduled for release. Those GDP data will come from France on Friday, and we expect growth in the euro area’s second largest member state to have picked up 0.1ppt from Q1 to 0.3 percent q/q, still well down on last year’s average of 0.7 percent q/q. Before that report, the dataflow kicks off today will a release of July’s flash estimate of euro area consumer confidence, which fell in June to an eight-month low, albeit still remaining historically high.

Tuesday, will bring the July flash PMIs, for which the June figures had provided a rare upside surprise, with the headline euro area composite PMI picking up for the first time since January to above the Q2 average thanks to improvement in the services sector, albeit with the manufacturing PMI falling to the lowest since end-2016.

On the following day, a release of Germany’s July Ifo business survey and euro area bank lending figures for June are due, while on Thursday, ahead of the ECB’s announcement, national consumer sentiment survey results from Germany, France and Italy will be announced.

Meanwhile, the German DAX traded 0.11 percent lower at 12,547.11 by 09:50GMT, while at 10:10GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -70.80 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex