FX.co ★ Bund Yields Dip as Kocher Warns Euro Strength Could Trigger ECB Cuts

Germany's 10-year Bund yield decreased to approximately 2.85%, pulling back from nearly 10-month highs. This movement occurred after European Central Bank (ECB) policymaker Martin Kocher cautioned that a further strengthening of the euro could potentially lead the central bank to resume interest rate reductions. The Governor of the Austrian Central Bank characterized the euro's recent appreciation against the dollar as "modest" and indicated that it does not yet necessitate a policy response. However, Kocher mentioned the ECB might have to intervene if further currency appreciation significantly affects inflation forecasts. Consequently, market participants slightly adjusted their expectations for a potential rate cut in the summer. The assumed likelihood of a 25-basis-point reduction in July increased to about 25%, up from around 15% previously. The euro surged past $1.20 for the first time since June 2021, following remarks by US President Donald Trump, who, despite the dollar's decline to a near four-year low, deemed its value as "great."