FX.co ★ France’s 10-Year OAT Yield Falls as Inflation Eases

The yield on France’s 10-year OAT decreased to 3.44%, its lowest since November, as investors assessed weaker inflation data from the eurozone. January's Consumer Price Index (CPI) fell to 1.7%, significantly below the European Central Bank’s (ECB) target. Meanwhile, core inflation unexpectedly dropped to 2.2%, the lowest since October 2021, suggesting that a stronger euro might lead to a resumption of rate cuts, which were paused in June. The ECB is scheduled to announce its policy on Thursday and is anticipated to maintain the current interest rates for the fifth consecutive meeting. ECB President, Christine Lagarde, is expected to emphasize that the current policy is stable. Concurrently, France’s 2026 state budget received parliamentary approval on Monday, resolving a prolonged stalemate that had heightened worries about increasing fiscal risks in the eurozone's second-largest economy. Initially, Prime Minister Sébastien Lecornu aimed for a deficit of 4.7% of GDP, but political compromises have increased this estimate to nearly 5%.