European bonds dropped for a third day as traders continued to reduce their bets on a final European Central Bank interest-rate cut this year.

In notes dated July 24, Goldman said it no longer expects the ECB to deliver a rate cut this year, while J.P. Morgan has pushed its rate-cut forecast to October from September previously. On Thursday, the ECB held policy rates unchanged at 2% after having cut interest rates eight times since June 2024.

European shares retreated on Friday, giving back gains from the previous session, as investors assessed mixed corporate earnings while awaiting updates on EU-U.S. trade discussions ahead of U.S. President Donald Trump's tariff deadline next week.

The European Central Bank is leaving interest rates unchanged as it waits to see how big a blow U.S. President Donald Trump's tariffs will inflict on the economy before deciding whether to cut rates again.

European stock markets began the final session of the week on a decidedly negative note, with the regional Stoxx 600 index moving broadly lower as a profit warning from automotive giant Volkswagen rattled the tariff-sensitive auto sector and overshadowed some pockets of positive corporate news.

Central bankers who gathered in Portugal this week focused on ways that Europe could improve its competitiveness with the United States and China.

European bond yields and the euro rose, lifted by hopes for a EU-U.S. trade deal and the European Central Bank’s pause in its aggressive rate-cutting campaign. Germany's benchma