German bunds trade narrowly mixed after tad higher Ifo business index; eyes on ECB’s policy decision

The German bunds traded narrowly mixed Thursday after the country’s business confidence rose unexpectedly in January, albeit at a slightly higher pace. Also, investors are now awaiting the European Central Bank’s (ECB) monetary policy decision, scheduled to be unveiled today by 12:45GMT.

The German 10-year bond yields, which move inversely to its price, traded flat at 0.59 percent, the yield on 30-year note also slipped nearly 1 basis point to 1.32 percent and the yield on short-term 2-year traded tad higher at -0.58 percent by 10:20GMT.

The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of some 7,000 firms, rose to 117.6 in January from 117.2 in December. The January reading beat expectations in a Reuters consensus forecast of analysts who had forecast a dip to 117.1.

Indeed, today’s main event will be that ECB policy announcement and press conference. We expect to see no substantive change made to the statement on policy, which in December left open the possibility of additional net asset purchases after the current phase ends in September, and also foresaw rates remaining at current levels well past the horizon of the net asset purchases.

With recent economic data and surveys having been so upbeat – e.g. yesterday’s flash PMIs were consistent with economic growth of 1 percent q/q or more at the start of the the year – Draghi will be able to remain relatively bullish about the outlook for economic growth. But the continued weakness of inflation in December means that he will remain circumspect about the price outlook.

Meanwhile, the German DAX traded -0.19 percent lower at 13,389.50 by 10:40 GMT, while at 10:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 34.55 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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