Eurozone's Financial Fluctuation: Rate Cuts Amid Economic Turbulence

German short-dated yields dropped to a 10-week low due to expectations of rate cuts amid weak data, before recovering slightly. Inflation figures from Germany exceeded predictions, while French inflation fell. The ECB's potential rate cuts are influencing yields, amidst U.S. tariff threats on European goods.

German short-dated yields dropped to a 10-week low on Friday as traders anticipated rate cuts due to weak economic data. However, yields slightly rebounded after Germany's inflation figures were stronger than expected. Friday's data showed a surprising decline in French inflation, marking a new four-year low in February.

Market analysts speculated a 50% chance of a fourth rate cut amid concerns about the euro bloc's economic health. Germany's 2-year bond yield, sensitive to European Central Bank (ECB) policies, initially plummeted to 1.999% before returning to 2.03%, a day-on-day decrease of 1 basis point.

U.S. President Donald Trump's proposed 25% tariff on European automobiles raised new anxieties about trade wars. Market attention is also on the ECB's upcoming meeting, with a potential 25-basis-point rate cut expected. Analysts suggest looming tariffs and low inflation will prompt the ECB to reduce rates to 2%, despite differing opinions among its members.

(With inputs from agencies.)