DAX Higher Despite Soft Inflation Reports

The DAX index has posted gains in the Friday session. Currently, the DAX is trading at 12,417, up 0.58% on the day. On the release front, the focus was on inflation indicators. German Wholesale Price Index declined 0.3%, missing the estimate of +0.2%. Eurozone Final CPI also disappointing, as the reading of 1.1% was shy of the forecast of 1.3%

Eurozone economic conditions continue to improve, but inflation indicators have failed to keep up. Inflation remains well below the ECB target of just under 2 percent despite the stronger eurozone economy, led by a robust German economy. In fact, Eurozone Final CPI has been dropping in recent months, and this worrisome trend continued in February, when the indicator dropped to 1.1%, down from 1.3% a month earlier. This marked the weakest gain since December 2016. On Wednesday, inflation was on the mind of ECB President Mario Draghi, who expressed caution about inflation. Draghi said that the ECB still needed to see evidence that inflation was gaining strength before there could be any talk about a change in monetary policy. In the meantime, the ECB would remain “patient, persistent and prudent”. Stronger economic conditions have led to growing speculation that the ECB will wind up its stimulus program in September. However, there is still plenty of slack in the economy, and coupled with low inflation, Draghi can afford to remain cautious and maintain current monetary policy for some time.

After months of negotiations, Germany has a government in place. However, the news failed to elicit much of a response from German stock markets. Angela Merkel may have been all smiles as she was crowned to a fourth term this week, but this time she stumbled across the finish line, as opposed to previous wins, when she cruised to victory. Merkel’s stature has diminished after a poor showing in the election back in September, and she will preside over a fractured coalition. Merkel was forced to give the socialist SDP the powerful finance and foreign ministry portfolios, so we can expect the new government to be more supportive of eurozone integration, including more assistance for weaker eurozone members and less rigidity over spending and budgets.

Economic Calendar

Friday (March 16)

  • 3:00 German WPI. Estimate +0.2%. Actual -0.3%
  • 6:00 Eurozone Final CPI. Estimate 1.2%. Actual 1.1%
  • 6:00 Eurozone Final Core CPI. Estimate 1.0%. Actual 1.0%

*All release times are EST

*Key events are in bold

 

DAX, Friday, March 16 at 6:10 EDT

Prev. Close: 12,345 Open: 12,381 High: 12,428 Low: 12,358 Close: 12,417

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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.