MARKET OVERVIEW - Expectations of ECB Rate Cuts Provide Support to Bond Markets

Forex - Rainer Guntermann from Commerzbank Research stated that expectations for interest rate cuts by the ECB should provide support to the bond markets.

Interest rate strategist Guntermann indicated that the yield for the 10-year German government bond, Bund, at 2.12% "probably marks the upper end of the range" and that German Bunds are likely to remain within that range. The strategist noted, "Meanwhile, the room for a drop below 2.05% currently appears limited." He emphasized that the European Central Bank is prepared to lower interest rates on Thursday and should leave the door open for further easing.

According to LSEG data, money markets are pricing in an 83% probability for a 25 basis point cut this week, while the probability for a larger cut of 50 basis points is set at 17%.