DAX Flat Ahead of ECB Rate Decision

The DAX posted considerable gains to start of the week, but the index has since been on pause. The trend continues in the Thursday session, as the DAX trades quietly at 12,437.50. Today’s highlight is the ECB policy meeting, with the markets expecting the benchmark rate to remain at 0.00%. On the release front, GfK German Consumer Climate climbed to 10.2, above the forecast of 9.9 points. Later in the day, Germany releases Preliminary CPI, with an estimate of -0.1%. Friday will be busy, with the release of German Retail Sales and Eurozone CPI Flash Estimate. Over in the US, we’ll get a look at Advance GDP.

ECB policymakers meet on Thursday for the monthly policy meeting. Although central bank meetings always attracts the attention of the markets, this could turn out to be a non-event, unless Mario Draghi makes some newsworthy comments in his press conference. The benchmark interest rate has been pegged at a flat 0.0% since March 2016, and no changes are expected. With the eurozone showing stronger inflation and growth numbers in the first quarter, there had been some pressure on the ECB to taper or shorten its asset-purchase program, which is scheduled to wind up in December. However, the ECB appears content to hold course, barring any significant change in growth or inflation numbers. There is also the political card to keep in mind, as the ECB does not want to be seen as intervening in the current French election, or when Germany holds elections in September.

ECB Leaves Rates, Guidance Unchanged

It’s back to the ballot box for French voters on Sunday, in the second round of the presidential election. The markets have priced in a convincing victory by Emmanuel Macron over Marie Le Pen. Macron enjoys a comfortable margin of 60-40 in opinion polls, but round two of the campaign has not gone well for the front-runner. Macron was jeered by workers at a factory in his hometown of Amiens, only to have Le Pen show up unexpectedly, to the delight of the workers. A BFM TV poll showed that more voters feel that Le Pen’s campaign has been more successful in the second round than that of Macron. This may not change the expected outcome of a Macron win, but a strong showing by Le Pen on Sunday would show that her strident anti-EU stance has wide popularity, and this could sour investor sentiment and send the stock markets to lower ground.

President Trump announced his long-awaited tax plan on Wednesday. The proposal calls for sharp reductions for both individuals and corporations. The plans calls three tax brackets for individuals – 10%, 25% and 35%. The corporate sector would also see significant tax relief, with the corporate tax rate dropping from 35% to 15%, and the tax on multinationals’ overseas profits lowered from 35% to 10%. However, any tax reform proposals from the White House will require a stamp of approval from Congress, so Trump’s proposal should be viewed as a blueprint that is a long way off from becoming law. Trump’s proposal was short on details, although government officials are praising it as one of the largest tax cuts and broadest overhauls of the tax system in history. There hasn’t been much reaction from the DAX , which has been subdued in Thursday trading.

Mnuchin and Cohn Present Trump Tax Proposal

Economic Calendar

Thursday (April 27)

  • 2:00 GfK German Consumer Climate. Estimate 9.9. Actual 10.2
  • All Day – German Preliminary CPI. Estimate -0.1%
  • 7:45 ECB Minimum Bid Rate. Estimate 0.0%
  • 8:30 ECB Press Conference

Friday (April 28)

  • 2:00 German Retail Sales. Estimate 0.1%
  • 5:00 Eurozone CPI Flash Estimate. Estimate 1.8%
  • 8:30 US Advance GDP. Estimate 1.3%

DAX, Thursday, April 27 at 6:40 EST

Open: 12,469.25 High: 12,472.00 Low: 12,453.50 Close: 12,442.00

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.