German bunds plunge ahead of ECB’s monetary policy decision, Eurozone’s April CPI

The German bunds plunged Tuesday as investors wait to watch the European Central Bank’s (ECB) monetary policy decision, scheduled to be unveiled on April 27. Also, expectations of a rise in the Eurozone’s consumer price inflation for the month of April, due to be released on April 28 added to the disappointment in safe-haven assets.      

The yield on the benchmark 10-year bond, which moves inversely to its price, jumped 3 basis points to 0.24 percent, the long-term 30-year bond yields surged nearly 4 basis points to 1.11 percent and the yield on short-term 2-year bond traded 1-1/2 basis points higher at -0.67 percent by 08:50 GMT.

The European Central Bank (ECB) is expected to maintain a slightly dovish tone at its monetary policy meeting scheduled to be held on April 27. Governor Mario Draghi has recently said 'a reassessment of the current monetary policy stance is not warranted at this stage' and he is expected to reiterate this, which should be perceived as dovish, ANZ Research reported. 

Now the pricing of the hike has been postponed to late 2018, after prominent ECB members expressed a dovish view, thereby dampening market participants' expectations. The recent dovish tone reflects the ECB's perception of the pricing of hikes as a tightening of the financial conditions, which it considered as unwarranted.

Meanwhile, the German stock index DAX Index traded flat at 12,455.50 by 08:50 GMT, while at 08:00GMT, the FxWirePro's Hourly Euro Strength Index remained highly bullish at 142.43 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex