The DAX has edged lower in the Wednesday session, as the index is currently trading at 12,462. It’s another quiet day on the release front, with no German or Eurozone indicators on the schedule. The markets will have some data to digest on Thursday, as Germany releases Consumer Confidence and Preliminary CPI. As well, the ECB will make an interest rate announcement.
The ECB will set interest rates on Thursday, with the markets expecting more of the same. The benchmark 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 has been speculation that the ECB might taper its asset-purchase program, which runs until December, ahead of schedule. However, the ECB appears in no rush to make any monetary moves, particularly with the current French election and the German election in September.
Investors cheered the results of the first round of the French presidential election. The first round winners, centrist Emmanuel Macron and far-right Marie Le Pen, will face off on May 7, with the winner becoming president. French voters will have a crystal-clear choice between the candidates, who want to take France in very different directions. Macron served as a minister under President Francois Hollande. He favors deregulation and is a staunch supporter of the European Union. Le Pen, who heads the National Front, has campaigned on a ‘France first’ platform, vowing to curb immigration and take France out of the eurozone. Hollande and Francois Fillon, who ran in the first round, have thrown their support behind Macron and asked voters to reject ‘extremism’. Macron is a heavy favorite to win the second round and become president, with polls giving him a comfortable lead of above 60%. Since opinion polls were accurate ahead of the first round of voting, the markets appear to relying on the current polls as well, meaning that the markets have priced in a Macron victory. Unless this sentiment drastically changes during the week, the election will be a non-event for the market. At the same time, nothing is a sure thing in politics, as underscored by the Brexit vote and the election of Donald Trump, two events which stunned the markets and triggered strong market movement.
President Trump will have to reach out to the Democrats in order to avoid a shutdown of the federal government on Saturday. Congress must pass a spending bill which will fund the government until October, but the bill requires the backing of 60 senators. This means that the Republicans (who control 52 seats) will need the support of 8 Democrats. This has led to bipartisan negotiations, and it’s reasonable to expect that these talks could go down to the wire, as both sides try to stick to their positions and try not to blink first. The last shutdown was in 2013, lasting 17 days. Another shutdown would be embarrassing for Trump, as it would start on his 100th day in office and would cast doubts on his ability to push his budget and tax plan through Congress.
Wednesday (April 26)
- There are no Eurozone or German events
Thursday (April 27)
- 2:00 GfK German Consumer Climate. Estimate 9.9
- All Day – German Preliminary CPI. Estimate -0.1%
- 7:45 ECB Minimum Bid Rate. Estimate 0.0%
- 8:30 ECB Press Conference
DAX, Wednesday, April 26 at 6:25 EST
Open: 12,469.25 High: 12,472.00 Low: 12,453.50 Close: 12,462.50
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