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DAX Jumps on Eurozone Current Account, Surplus, U.S Gov. Shutdown Worries

The DAX has posted strong gains in the Friday session. Currently, the index is trading at 13,407.00, up 0.94% on the day. On the release front, it’s a quiet end to the trading week. The Eurozone Current Account Surplus widened to EUR improved to  32.5 billion, beating the estimate of EUR 31.3 billion.

A booming German economy is not without its problems. Case in point, the country’s large current account and budget surpluses. A strong demand for German products, record low unemployment and the ECB’s expansionary monetary policy have all contributed to the surpluses. What should be done with all these funds? This was a source of disagreement a recent conference in Frankfurt, hosted by the IMF and German Bundesbank. IMF Managing Director Christine Lagarde suggested that Germany should increase public spending. However, Bundesbank President Jens Weidmann acknowledged that the surpluses may be getting too large, but that increasing public expenditures was not the solution. With the German economy far outpacing its eurozone peers, most of them would likely envy Germany’s quandary over what to do with large surpluses. Weidmann made headlines earlier in the week, when he stated that he did not expect interest rates to rise until mid-2019, even if QE ends in late 2018. If Weidmann reiterates this stance on Thursday, investors may take note and the euro could backtrack on some of its recent gains.

The markets are glued to Washington, where a Federal government shutdown will take place on Saturday if Congress does not reach agreement on a short-term spending bill. The House of Representatives passed such a bill on Thursday, but Republicans face a tougher battle in the Senate. A 60-seat majority is needed for the measure to pass, which means that the Republicans, who have a 51-49 majority, will need substantial support from the Democrats. However, many Democrat lawmakers are incensed over President Trump’s threat to deport young illegal immigrants and his recent inflammatory language against immigrants from poor countries. A government shutdown last occurred in 2013, and resulted in temporary layoffs for 800,000 non-essential Federal workers. With an election year in 2018, lawmakers from both parties will not want to anger voters, so we could see a last minute compromise which prevents a shutdown.

U.S Dollar Shutdown [1]

Economic Calendar

*All release times are GMT

*Key events are in bold

DAX, Friday, January 19 at 12:50 EDT

Open: 13,192.00 High: 13,280.50 Low: 13,279.00 Close: 13,407.00

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher [5]

Market Analyst at OANDA [6]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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