DAX Rebounds, ECB Minutes Next

The DAX index has posted gains in the Thursday session. Currently, the DAX is trading at 12,355 points, up 0.50% on the day. On the release front, Eurozone Industrial Production disappointed with a second straight decline. The reading of -0.8% missed the estimate of 0.1%. Later in the day, the ECB releases the minutes of its March rate meeting. On Friday, Germany releases Final CPI.

The Federal Reserve minutes were hawkish in tone, a reflection of a strong US economy. All of the Fed policymakers indicated that the US economy would continue to improve and that inflation would rise in the next few months. At the March meeting, the Fed unanimously voted to raise rates by a quarter-point, bringing the benchmark rate to a range between 1.50% and 1.75%. The Fed projection for rate policy in 2018 remains at three hikes, although there is speculation that the Fed could revise the forecast to four rate hikes. Last week, Fed Chair Jerome Powell said that the Fed would likely continue to raise rates in order to keep a lid on inflation, but added that the rate moves would be gradual. A new headache for the Fed is the escalating trade battle between the US and China, which could hurt the economy and raise consumer prices. Next on the menu? The Fed is expected to stay on the sidelines in May and raise rates at the June meeting.

It’s been a volatile week for European stock markets and investors are bracing for more movement, with tensions at a fever pitch in the Middle East. The markets reacted positively as the trade battle between the US and China took a pause. On Sunday, US officials sought to lower the temperature over the tariff spat, with Treasury Secretary Steve Mnuchin saying that he didn’t expect a trade war between the world’s largest two economies.  This was followed by a conciliatory message from Chinese President Xi Jimping on Tuesday. Xi was speaking at a development conference in China, and promised to lower tariffs on vehicle imports into China. However, sentiment turned negative on Wednesday, as the rhetoric between the US and Russia has ratcheted higher. Syrian forces allegedly used chemical weapons against rebel positions last week, and a UN Security Council meeting ended inconclusively after Russia cast a veto on a US proposal to probe the attack. US President Trump has warned that a US response is on the way, and Russia has countered that it will respond to any US move. If Trump makes good on his promise, investors could lose their risk appetite and the markets could spiral downwards.

Middle East embers look set to ignite

Dollar Gains Limited by Geopolitical Risks

Economic Fundamentals

 Thursday (April 12)

• 15:00 Eurozone Industrial Production. Estimate 0.1%
• 7:30 ECB Monetary Policy Meeting Accounts
• 12:00 German Buba President Weidmann Speaks

 Friday (April 13)

• 2:00 German Final CPI. Estimate 0.4%
• 5:00 Eurozone Trade Balance. Estimate 20.2B

*All release times are DST

*Key events are in bold

DAX, Thursday, April 12 at 8:40 EDT

Prev. Close: 12,293 Open: 12,291 Low: 12,263 High: 12,365 Close: 12,355

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