German bunds rise ahead of January ZEW economic sentiment index, ECB monetary policy meeting

The German bunds rose during European session Monday ahead of the country’s ZEW economic sentiment index for the month of January, scheduled to be released on January 22 by 10:00GMT and the European Central Bank’s (ECB) monetary policy decision, due on January 24 by 12:45GMT.

The German 10-year bond yields, which move inversely to its price, slipped 1 basis point to 0.251 percent, the yield on 30-year note fell 1-1/2 basis points to 0.857 percent and the yield on short-term 2-year remained tad lower at -0.588 percent by 10:15GMT.

"The main event in the euro area this week will be the conclusion of the ECB’s latest policy meeting on Thursday. While its policy guidance will undoubtedly be left unchanged, we expect the Governing Council’s economic assessment and Draghi’s press conference to adopt a more dovish tone," Daiwa Capital Markets reported.

In particular, with the recent dataflow having signalled a further slowdown in economic momentum in the euro area heading into the New Year, Draghi last week admitted that uncertainties remain prominent.

Indeed, some Governing Council members at December’s meeting had already cautioned more strongly about rising downside risks. And Draghi’s opening statement on Thursday should acknowledge that the risks to the outlook are now skewed to the downside.

The next policy initiative of the ECB will relate to liquidity, and so the press conference might also see Draghi questioned about whether, and if so what, work is currently underway on future long-term financing operations, the report added.

Meanwhile, the German DAX slipped 0.44 percent to 11,155.72 by 10:20GMT, while at 10:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 49.23 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex