Two European Central Bank (ECB) policymakers warned yyyesterday about the hit from a further appreciation of the euro on a weak euro zone economy that is bracing for US tariffs.

The 90-day pause Trump activated following the market chaos unleashed by his April 2 “Liberation Day” tariff announcement expires in a week.

ECB president Christine Lagarde said this week the euro zone is facing increased volatility in inflation, which will mean the central bank will have to act more forcefully to keep price pressures around its 2% target.

German two-year yields, which tend to be the most sensitive to changes in rate expectations, were up less than 1 basis point today at 1.852%.

Benchmark 10-year Bund yields rose 1 bp to 2.577%, in line with 10-year Treasuries, which held at 4.255%, near their lowest since early May.

Money markets show traders expect just one more rate cut this year from the ECB, which would bring the benchmark deposit rate to around 1.8%, from 2% right now.

Lagarde speaks later today, delivering the closing remarks at the ECB’s Forum on Central Banking in Portugal.

ECB board members Luis de Guindos, Piero Cipollone and Philip Lane will also speak during the day.

Italian 10-year yields rose 2 bps to 3.489%, bringing their premium over Bunds to 90.5 bps, according to LSEG data.

The spread is close to its lowest in a decade.