The head of the ECB, Christine Lagarde, dampens speculation about an imminent interest rate hike in the euro area. As a result, investors are parting with Bunds and pushing up their yields.
Investors also stayed away from European bond markets on Tuesday. The reason for this were statements by the head of the European Central Bank (ECB), Christine Lagarde, who on the previous day put a damper on speculation about imminent interest rate hikes in the euro zone. The ECB does not anticipate a longer-term inflation rate above the target of two percent. “But investors will take these comments with a grain of salt as the ECB is lagging far behind,” warned Craig Erlam, an analyst at brokerage firm Oanda. As long as there are no signs that inflation is peaking and declining significantly, Lagarde’s assurances have fallen on deaf ears. As a result, investors continued to withdraw from government bonds. That drove the yield on ten-year federal bonds to 0.27 percent and thus to the highest level since the beginning of 2019.
The euro also reacted to the statements by the head of the ECB and fell a quarter of a US cent to $1.1416. “Finally, investors are well aware that interest rates will rise much more sharply in the US than in the euro zone in the coming months,” commented Unicredit’s investment strategists.
The price of oil also went down. Brent from the North Sea fell 1.8 percent to $91 a barrel. “The resumption of indirect talks between the United States and Iran could lead to a reopening of international markets for Iranian oil,” said analyst Ricardo Evangelista Broker Activ-Trades. Meanwhile, supply constraints fueled aluminum prices again after many Chinese smelters shut down production. China produces more than half of the industrial metal used in aircraft and automobile construction. In London, it rose 1.7 percent to $3,187, the highest since July 2008.