German bunds remain mixed after June CPI meets market expectations; ECB’s June meeting minutes in focus

The German bunds remained mixed during European session Thursday after the country’s consumer price inflation (CPI) for the month of June met market expectations and investors will now be eyeing the European Central Bank’s (ECB) monetary policy meeting minutes for the month of June, scheduled to be released later today.

The German 10-year bond yields, which move inversely to its price, remained tad lower at 0.30 percent, the yield on 30-year note hovered around 1.02 percent and the yield on short-term 2-year traded nearly 1 basis point down at -0.65 percent by 09:00GMT.

Most notable in the euro area today, perhaps, the ECB will publish its account of the June monetary policy meeting where the Governing Council approved its plans to end its net asset purchases at year-end and issued new forward guidance on rates and reinvestments. When Draghi unveiled those decisions, he was keen to emphasise that the Governing Council was unanimous in its support for numerous aspects of the policy statement.

However, differences of opinion among the members about what that statement precisely meant have, perhaps predictably, now increasingly become clear. While at least one member judges the stated expectation that interest rates will remain unchanged ‘at least through the summer of 2019’ to preclude a September hike, others have made it known that, in their view, an end-year rate rise could come too late. Likewise, the Bundesbank has tried to kick back on suggestions that the national central banks could be instructed to undertake more active reinvestments of maturing principal in order to achieve monetary policy objectives.

Data-wise, there were no surprises from this morning’s final German and French inflation figures for June, with the flash estimates confirmed. So, German CPI on the EU measure fell 0.1ppt from May to 2.1 percent y/y while the equivalent French measure rose 0.1ppt on the month to 2.4 percent y/y.

So, the final euro area figures, due next week, seem highly likely to confirm the flash estimates, with headline inflation up 0.1ppt from May to 2.0 percent y/y, but core inflation down 0.1ppt to just 1.0 percent y/y, still firmly within the range of the past four years.  

Meanwhile, the German DAX traded 0.40 percent higher at 12,458.83 by 09:05GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -5.48 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex