What is the right course of action?

You answered correctly. In this situation, you see a yield (give way) sign. According to German traffic rules, when you approach a yield sign, you must give right of way to all traffic on the priority road—including vehicles, cyclists, and pedestrians. Here, the cyclist is approaching from your left on the priority road, so you must wait and allow the cyclist to go first. Remember: the presence of the yield sign always means you must let other road users pass before you proceed. This helps ensure safety at intersections.