The DAX Index is slightly higher in the Thursday session, trading at 11,940.00 in the European session. In economic news, the ECB will set the benchmark rate, which is expected to remain at 0.00%. ECB President Mario Draghi follows with a press conference.
With the markets all abuzz that the Federal Reserve will raise rates next week, the ECB’s policy meeting has almost fallen off the radar. The benchmark rate has been pegged at 0.00% since March 2016, and no change is expected at Thursday’s meeting. Inflation levels have finally moved higher and eurozone inflation is expected at 2.0% in February, meeting the central bank’s inflation target. ECB President Mario Draghi appears comfortable with current monetary policy, although the ECB could tighten its stance if growth and inflation levels continue to point upwards.
The DAX broke above the symbolic 12,000 level last week, but has dipped lower following a capital raise announcement by Germany’s Deutsche Bank (DE:DBKGn). The bank has announced a major reorganization, including raising EUR 8 billion by issuing 687.5 million shares on March 21.
Deutsche Bank has hit rough waters, and it seemed only a matter of time before it would have to take some drastic measures. In December, the bank reached a $7.2 billion settlement with the U.S. Department of Justice for selling toxic mortgage-backed securities. Deutsche had a dismal 2016, with losses of EUR 1.4 billion. This capital hike is the fourth since 2010, and it remains to be seen if this move will attract investors and help set the bank in the right direction. Deutsche Bank is one of the larger companies on the DAX, so lower share prices this week for Deutsche has weighed on the DAX.
The Federal Reserve waited an entire year to raise rates in December, but appears ready to make a March move. The odds of a March hike continue to climb, and are currently at 88% percent, according to the CME Group (NASDAQ:CME). Fed policymakers have been dropping hints of a March move, and a red-hot labor market and higher inflation levels present further arguments in favor higher rates.
Earlier in the year, the Fed had said that it wanted to wait until it had a clearer idea of President Trump’s economic policy before it tightened monetary policy. However, Trump has not backed up his promises to reform the tax code and increase fiscal spending with any details. Some Fed policymakers wanted to raise rates earlier this year, so Fed Chair Yellen is under pressure to make a move, and it appears virtually certain that the Fed will raise rates by a quarter-point on March 15.
EUR/USD Fundamentals
Thursday (March 9)
- 1:30 French Final Nonfarm Payrolls. Estimate 0.4%. Actual 0.4%
- Day 1 – ECOFIN Meetings
- 7:45 ECB Minimum Bid Rate. Estimate 0.00%
- 8:30 ECB Press Conference
Upcoming Key Events
Friday (March 10)
- 8:30 US Nonfarm Employment Change. Estimate 185K
*All release times are EST
*Key events are in bold
DAX for Thursday, March 9, 2017
DAX, March 9 at 6:35 EST
Open: 11,924.75 High: 11,963.00 Low: 11,920.00 Close: 11,940.00