DAX Edges Lower after Powell Says Rate Hikes to Continue

The DAX index has posted slight losses in the Wednesday session. Currently, the index is trading at 12,455.59, down 0.28% since the Monday close. On the release front, Germany Gfk Consumer Climate edged down to 10.8, matching the estimate. Unemployment claims dropped by 22 thousand, beating the forecast of a decline of 17 thousand. In the Eurozone, CPI Flash Estimate and Core CPI Flash Estimate posted gains of 1.2% and 1.0%, respectively. Both indicators matched their estimates. Over in the US, Preliminary GDP is expected to rise 2.5%. On Thursday, Germany and the eurozone release manufacturing PMIs. In the US, Fed chair Jerome Powell testifies before the Senate Banking Committee.

US stock markets posted sharp losses on Tuesday, after Federal Reserve Chair Jerome Powell stated that the Fed would continue to raise rates gradually. Will European markets follow suit on Wednesday? Powell sounded optimistic about economic conditions, noting that the US economy was benefiting from the global recovery as well as changes in fiscal policy. Importantly, Powell did not address the question of an acceleration of rate hikes. Currently, the Fed has projected three rate hikes in 2018, with increases widely expected at the March and May meetings. However, with inflation moving higher and the economy continuing to perform well, many analysts expect the Fed to raise rates four or more times this year. Any hints at an increased pace of rate hikes could send the US dollar higher and  send European stock markets downwards.

The markets did a good job estimating inflation data for February, as German and Eurozone CPI readings matched the estimates. The numbers show that inflation remains well below the ECB target of 2 percent, so policymakers needn’t worry about raising rates for some time. The ECB recently lowered its monthly bond purchases, with the program expected to wind up in September. If the economy remains strong, the ECB could opt to raise rates in the fourth quarter or in early 2019.

 

Economic Calendar

Wednesday (February 28)

  • 2:00 German GfK Consumer Climate. Estimate 10.8. Actual 10.8
  • 3:55 German Unemployment Change. Estimate -17K. Actual -22K
  • 5:00 Eurozone CPI Flash Estimate. Estimate 1.2%. Actual 1.2%
  • 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 1.0%
  • Tentative – German 10-year Bond Auction
  • 8:30 US Preliminary GDP. Estimate 2.5%

Thursday (March 1)

  • 3:55 German Final Manufacturing PMI. Estimate 60.3
  • 4:00 Eurozone Final Manufacturing PMI. Estimate 58.5
  • 10:00 US Fed Chair Powell Testifies

*All release times are EST

*Key events are in bold

 

DAX, Wednesday, February 28 at 6:35 EDT

Open: 12,425.50 High: 12,479.12 Low: 12,419.38 Close: 12,455.59

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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.