FX.co ★ Germany’s 10-Year Yield Holds as Markets Digest US Tariffs, ECB Outlook

Germany's 10-year Bund yield has stabilized just above 2.7% as investors analyze the potential consequences of newly imposed US tariffs and the latest Eurozone inflation figures. The effective US tariff rate has significantly increased to approximately 15%, up from just over 2% at the year's outset—marking the highest rate since the 1930s. Due to a last-minute agreement reached right before the August 1 deadline, the EU now faces a 15% tariff on exports to the US. In parallel, Eurozone consumer inflation remained steady at 2.0% in July, aligning with the European Central Bank's (ECB) target for the second consecutive month but slightly surpassing the 1.9% that markets had anticipated. Core inflation remained constant at 2.3%. Given that headline inflation is expected to remain above the ECB's predictions in the upcoming months, further rate reductions appear increasingly improbable. Nonetheless, markets are currently assigning a 90% probability of a 25 basis point rate cut by the ECB by March 2026. In the United States, the hawkish tone from Federal Reserve Chair Jerome Powell has reduced the likelihood of a rate cut at the September meeting.