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ECB Policy · Eurozone Bonds · Inflation · Iran-US Deal
Euro zone bond yields experienced slight declines on Friday as investors anticipated progress on a potential U.S.-Iran deal concerning the Strait of Hormuz, while mixed inflation data from Germany and Spain added to market uncertainty.
The prospect of a renewed ceasefire between the U.S. and Iran stabilized oil prices and fostered optimism for reduced geopolitical tensions. Germany's benchmark 10-year bond yield remained steady, but the two-year yield, sensitive to European Central Bank (ECB) interest rate expectations, declined slightly.
This movement reflected weaker-than-expected inflation figures in Germany contrasted with higher-than-expected data in Spain. Despite the geopolitical optimism, euro zone inflation concerns persist, with central bank rate hike expectations remaining high; there is a 91% chance of an ECB hike at its June meeting.
Separately, the European Central Bank appointed Roland Straub as the new head of its monetary policy division, effective July 1, succeeding Massimo Rostagno. The dollar stabilized against major currencies but is set to end the week lower, influenced by the U.S.-Iran ceasefire deal reports which also saw Brent crude oil drop.
