Germany’s 10-year Bund yield hovered slightly above 2.7% as investors weighed the impact of newly announced US tariffs and fresh Eurozone inflation data.
The effective US tariff rate has surged to around 15%, up from just over 2% at the start of the year—its highest level since the 1930s.
The EU now faces a 15% tariff on its exports to the US, following a last-minute deal reached just before the August 1 deadline.
Meanwhile, Eurozone consumer inflation held steady at 2.0% in July, matching the ECB’s target for a second straight month but slightly exceeding market expectations of 1.9%.
Core inflation remained unchanged at 2.3%.
With headline inflation likely to remain above the ECB’s projections in the coming months, further rate cuts appear increasingly unlikely.
Still, markets are pricing in a 90% chance of a 25 basis point ECB rate cut by March 2026.
In the US, Federal Reserve Chair Jerome Powell’s hawkish stance has dampened expectations for a rate cut at the September meeting.