German bunds tad lower ahead of January CPI, unemployment change data

The German bunds remained tad lower during European session Wednesday ahead of the country’s consumer price inflation (CPI) data and unemployment change data for the month of January, scheduled to be released on January 30 and 31 by 13:00GMT and 08:55GMT respectively.

The German 10-year bond yields, which move inversely to its price, remained tad higher at 0.198 percent, the yield on 30-year note hovered around 0.796 percent and the yield on short-term 2-year edged 1/2 basis point higher to -0.572 percent by 09:30GMT.

This morning’s German consumer confidence survey was also slightly stronger than expected, with the headline index rising from 10.5 to 10.8, a level previously seen last May. German consumers were more upbeat about their incomes, and their willingness to buy also improved – both appear to be a result of ongoing improvements in the labour market, with ongoing jobs growth and the strongest growth in wages for decades.

In contrast, however, consumers’ assessment of the economy deteriorated for a fourth month in a row to the weakest level since early 2017. The survey suggested that consumers remain concerned about a number of external economic factors – from the US/China trade war to Brexit – but the strength of the jobs market should continue to provide a decent level of comfort going forward.

Later today markets will receive the first guide to inflation this month in the form of the flash German CPI data. With prices expected to have declined sharply in January (-1.0 percent m/m), the annual rate of inflation is expected to be unchanged at 1.7 percent y/y.

Also due this morning are the results of the European Commission’s business and consumer surveys – arguably the best guide to euro area GDP growth. While the flash consumer indicator suggested a modest improvement in January (albeit at -7.9 it was still the second-lowest reading in twenty-two months), business sentiment is expected to have further deteriorated at the start of the year. So, the headline Economic Sentiment Indicator is forecast to record the thirteenth consecutive decline to its lowest level since November 2016, Daiwa Capital Markets reported.

Meanwhile, the German DAX slipped -0.17 percent to 11,200.43 by 09:40GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained slightly bullish at 84.75 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex