German bunds rise in quiet trade, CPI data in focus

The German bunds traded firmer Monday in thin trading activity during a relatively quiet session that witnessed data of little significance. We foresee that the bund prices will keep drifting between small gains and losses in thin trading due to global New Year holiday.

Also, thin trading volumes were observed as markets in Japan, China, Hong Kong, the U.S. and the UK, among others, will be closed for the day on account of New Year's Day.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 3 basis points to 0.17 percent, the long-term 30-year bond yield also dipped 3 basis points to 0.92 percent and the yield on short-term 3-year bond slid 1-1/2 basis points to -0.76 percent by 09:20 GMT.

In term of recent economic data, Germany’s December Markit/BME final Manufacturing PMI came in at 55.6, a tad higher than 55.5 market expectations. Also, the final Eurozone-wide manufacturing PMI for December was left unrevised vs its preliminary estimate of 54.9, matching expectations. This figure was notably up from 53.7 in November to a 5-year high.

Rimsevics, Latvia's central bank governor, blamed a lack of progress on economic reform and on the European Commission's stimulus package for curbing confidence and lending despite the ECB's massive injection of cash since 2015, Reuters reported.

The ECB has extended its bond-buying scheme until the end of 2017 saying it was yet to be convinced that inflation was heading to its target of almost 2 percent, they added.

Moreover, the Federal Reserve Chair Janet Yellen commented that the United States is now seeing its strongest labour market in nearly a decade as job creation has continued at a relatively steady pace. Also added that she has seen signs of wage growth improving and that weekly earnings for younger workers are making strong gains.

Lastly, investors will remain keen to focus on the upcoming economic data, highlighted by the unemployment rate, consumer inflation, PMIs and retail sales.

Meanwhile, the German stock index DAX Index traded 0.77 percent higher at 11,570 by 09:20 GMT. While at 09:00 GMT, the FxWirePro's Hourly Euro Strength Index stood neutral at -31.07 (lower than -75 represent a bearish trend).