Eurozone periphery bonds gain as investors await ECB’s policy decision

The Eurozone periphery bonds gained Wednesday as investors wait to watch the European Central Bank’s (ECB) monetary policy decision, scheduled to be unveiled on July 20.

The benchmark German 10-year bond yields, which moves inversely to its price, slumped nearly 2 basis points to 0.54 percent, the French 10-year bond yields also slumped nearly 2 basis points to 0.80 percent, Irish 10-year bond yields slid a little over 2 basis points to 0.84 percent, Italian down 1 basis point to 2.18 percent, Netherlands 10-year bond yields also lower 2 basis points to 0.66 percent, Portuguese equivalents struggled nearly 1 basis point at 3.05 percent and the Spanish 10-year yields slid 1-1/2 basis points to 1.53 percent by 09:10 GMT.

Today should be relatively uneventful for economic news from the euro area, with the May construction output report the most notable new release. Supported by an easing of financial conditions, euro area construction output grew a healthy 0.8 percent q/q in Q1.

The ECB is expected not to announce any major policy changes at its July meeting. However, it is possible the central bank will again tweak its forward guidance after making a change in June. This time around, the ECB may remove its easing bias with respect to its unconventional policy settings by dropping its reference to increasing the size and/or duration of its asset purchase program.

"We still expect the ECB to continue its QE purchases but at a reduced pace of EUR40bn per month in H1 18, keeping the end-date dependent on the inflation outlook. That said, we believe it is most likely the ECB will taper towards zero in H2 18", stated Danske Bank.

Meanwhile, the pan-European STOXX 600 index was up 0.26 percent to 383.58, German DAX nearly flat at 12,431.50, France’s CAC 40 climbed 0.20 percent to 5,183.80 while the PSI20 Index traded 0.04 percent lower at 5,306.41 by 09:50 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 26.24 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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