FX.co ★ Bund Yields Edge Higher After US-Japan Trade Deal

On Wednesday, Germany's 10-year Bund yield increased to 2.62% following a decline of more than 10 basis points on Monday and Tuesday. This shift was influenced by the recently announced trade agreement between the US and Japan, which alleviated concerns about rising global tariffs and revived optimism for a potential similar agreement with the EU. Despite this relief, market sentiment remains cautious. Reports suggest that EU envoys are considering contingency plans in the event of a failure in trade negotiations with US President Donald Trump, who has taken a more assertive stance on tariffs ahead of the August 1 deadline. Investors are also turning their attention to the European Central Bank's (ECB) policy decision due on Thursday and the release of flash Purchasing Managers' Indexes (PMIs) from major European economies. The ECB is anticipated to maintain steady interest rates following eight consecutive reductions, as officials assess ongoing trade uncertainties, a strong euro, and subdued inflation. Money markets are fully anticipating a 25 basis point rate cut by December, with approximately a 50% likelihood of this adjustment taking place in September.