FX.co ★ French OAT Yields Retreat as Middle East Hopes Ease Inflation Pressures

France’s 10-year OAT yield slipped below 3.7%, retreating from a 17-year high as hopes for de-escalation in the Middle East tempered inflation worries. Reports that the US had put forward a peace proposal to Tehran—despite Iran’s denial—pushed Brent crude back under $100 a barrel, easing fears of a renewed energy-driven surge in prices. Markets are now pricing in just two ECB rate hikes by year-end, down from three previously. ECB President Christine Lagarde reiterated that the central bank stands ready to act “at any meeting” if energy shocks risk feeding through more broadly into inflation. At the same time, data released on Tuesday showed French business activity contracted more than expected in March, as subdued demand and sharply rising input costs continued to weigh on economic momentum.