German bunds trade lower ahead of ECB President Draghi’s speech, June ZEW economic sentiment

The German bunds traded lower during European trading session Monday ahead of the European Central Bank (ECB) President Mario Draghi’s speech, scheduled to be delivered today by 17:00GMT and the country’s ZEW economic sentiment index for the month of June, due to be released on June 18 by 09:00GMT, besides, a host of other economically significant data.

The German 10-year bond yields, which move inversely to its price, rose 1-1/2 basis points to -0.242 percent, the yield on 30-year note surged nearly 2 basis points to 0.339 percent and the yield on short-term 2-year traded nearly 1-1/2 basis points higher at -0.677 percent by 10:50GMT.

While there is no monetary policy meeting for the Governing Council this week, the ECB’s Sintra Forum on Central Banking – its equivalent to the Fed’s Jackson Hole symposium, which has previously been used by Mario Draghi to provide a shift in communication to try to influence the financial markets – will be the principal focus at the start of the week, Daiwa Capital Markets reported.

Indeed, fears of a de-anchoring of inflation expectations will be weighing on Draghi’s mind after market-based measures last week slumped to record lows, with the closely-watched 5Y5Y inflation swap forward rate now sub-1.14 percent.

The back end of the week will bring flash sentiment surveys for June. In particular, the Commission’s preliminary consumer confidence indicator (Thursday) is expected to show that household sentiment improved slightly in June, rising to its highest level in seven months, albeit still not far from the bottom of the recent range. Business confidence, meanwhile, is likely to show little improvement at the end of the second quarter, with manufacturing conditions likely impacted again by the ongoing US trade wars, the report added.

As such, the headline manufacturing PMI is expected to remain firmly in contractionary territory. And the services PMI is expected to move broadly sideways, leaving the composite PMI little changed from the 51.8 reading in May and therefore consistent with a moderation in GDP growth in Q2, Daiwa further noted in the report.

Meanwhile, the German DAX remained flat at 12,098.01 by 10:55GMT, while at 10:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -17.48 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex