FX.co ★ Germany’s Bund Yield Eases Following US-EU Trade Agreement

Germany's yield on the 10-year Bund marginally decreased to just under 2.7%, following a ten basis point increase the previous week. This adjustment in market sentiment is a response to the recent announcement of the US-EU trade agreement. The accord institutes a 15% base tariff on most European Union exports to the United States, including automobiles, semiconductors, and pharmaceuticals. However, it maintains 50% tariffs on steel and aluminum, applying only above certain quota levels. Interestingly, the agreement exempts aerospace components, selected chemicals, and raw materials from these tariffs. In conjunction with the trade reforms, the EU has agreed to procure $750 billion worth of American energy products and military equipment. In terms of monetary policy, investors have tempered their anticipation of additional interest rate cuts by the European Central Bank (ECB). This shift follows the ECB's decision to maintain current rates, breaking a year-long trend, as ECB President Lagarde affirmed that the eurozone's inflation levels are now aligned with targets, indicating a stable economic position. Nonetheless, concerns linger about how the new tariffs might influence the broader economic landscape, potentially affecting future economic projections.