Bund yields fall as markets eye ECB, PMIs, and tariff talks

Germany’s 10-year Bund yield dipped below 2.65%, marking its lowest level since July 9, as investor attention shifted toward a pivotal week for European markets. All eyes are on the European Central Bank’s upcoming policy decision and the release of flash purchasing managers’ indexes (PMIs) from Europe’s largest economies, both due Thursday.

These events are expected to shape investor sentiment and provide critical signals on the trajectory of monetary policy and economic health across the eurozone.

Market participants remain cautious amid heightened global trade tensions, particularly as EU-US tariff negotiations continue under a cloud of uncertainty. With the August 1 deadline for potential new US tariffs looming, the European Commission is bracing for possible escalation, prompting EU envoys to prepare for contingency planning as early as this week.

US President Donald Trump’s increasingly hawkish rhetoric on trade has added to investor unease, especially in export-reliant sectors.

The ECB, meanwhile, is widely expected to hold interest rates steady following eight consecutive rate cuts, as policymakers adopt a more data-dependent, wait-and-see approach. This pause reflects a complex balancing act amid lingering tariff risks, a stronger-than-expected euro, and inflation that remains well below the central bank’s target.

At the same time, preliminary July composite PMIs for France, Germany, and the broader eurozone are forecast to edge higher, suggesting modest improvement in business activity. These readings could offer fresh clues about the region’s economic resilience and help calibrate expectations for future ECB moves.

With the eurozone economy navigating a fragile recovery, investors are likely to scrutinize both the policy tone and the PMI data for indications of where growth and inflation are headed in the second half of the year.