The euro traded broadly steady as euro area bond yields rose while markets recovered from Friday's retreat after Jerome Powell's dovish remarks at Jackson Hole. Investor sentiment was supported by resilient business surveys, notably Germany's Ifo index, though the overall recovery remains fragile. Monetary policy expectations stayed balanced after ECB President Christine Lagarde's July message that rates were "in a good place," but the ECB's projections showing inflation dipping below target in 2026 leave scope for renewed easing. Traders now target October and December for possible policy recalibration. Eurozone yields climbed across the curve, with the German 10-year near 2.75% and the French around 3.45%. Incoming German retail sales, inflation data and eurozone sentiment surveys will be watched as potential catalysts for ECB decisions and the euro.
The euro traded broadly steady on Monday, as euro area bond yields moved higher as markets recovered from Friday's sharp retreat triggered by Jerome Powell's dovish remarks at Jackson Hole. Investor sentiment toward the single currency was supported by signs of resilience in recent business surveys, with Germany's Ifo index posting a modest upside surprise, even as the overall recovery remains fragile.
Monetary policy expectations remain balanced. ECB President Christine Lagarde's July message that rates were "in a good place" reinforced the impression of a pause, which could favour the single currency. However, the central bank's own projections, which anticipate inflation dipping below target in 2026, leave scope for renewed easing. Traders now see October and December as potential windows for policy recalibration should data soften.
Eurozone yields moved higher across the curve, with French and German bonds erasing part of Friday's decline. The German 10-year yield climbed back toward 2.75%, while the French was near 3.45%. Looking ahead, traders will monitor incoming data, including Germany's retail sales and inflation reports, alongside eurozone sentiment surveys. These releases could prove pivotal in shaping expectations for the ECB's next meetings and provide the next catalyst for the single currency.
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