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Euro zone inflation gauge ticks up on ECB, euro reverses earlier fall

Published 25/07/2019, 14:15
© Reuters. Euro zone inflation gauge ticks up on ECB, euro reverses earlier fall
DE40
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IT10YT=RR
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July 25 (Reuters) - Money markets' gauge of long-term
inflation expectations in the euro zone ticked higher on
Thursday after the ECB flagged a sweeping stimulus package,
though the euro, stocks and bonds reversed earlier knee-jerk
gains.
The five-year/five-year forward inflation swap EUIL5YF5Y=R
traded as high as 1.3582, the highest since May.
But the euro as well as bond yields reversed their early
fall as European Central Bank governor Mario Draghi sounded more
upbeat on the economy than expected. That pushed the single
currency up to $1.1151 after falling earlier to $1.110
EUR=EBS , up 0.1% on the day.
It also firmed 0.3% versus the Swiss franc EURCHF=D3 .
German 10-year yields also inched off record lows to
-0.354%, and were flat on the day while Italian 10-year yields
yields reversed earlier sharp falls to rise as much as five
basis points to 1.55%, up from a low of 1.38% IT10YT=RR .
"Draghi wasn't sufficiently gloomy enough to warrant more
easing than what markets are expecting in September. On the
contrary, he is pointing at more pockets of strength in the
economy such as labour and services and that is causing this
rebound in euro and bond yields," said Esther Maria Reichelt, a
strategist at Commezbank in Frankfurt.
Markets slightly trimmed their bets on a 10 bps cut in
September to 84% from 94% immediately after the ECB policy
statement. ECBWATCH
Germany's blue-chip stocks index fell into negative
territory .GDAXI and was down 0.2% at 1300 GMT.

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