The DAX Index moved higher in the Friday session, trading at 12,059.75 in European trade. In economic news, German numbers were mixed. The trade surplus was almost unchanged at EUR 18.5 billion, short of the estimate of 19.2 billion. There was better news on the inflation front, as German WPI posted a gain of 0.5%, beating the forecast of 0.3%. The markets will be keeping an eye on US Nonfarm Payrolls, which is expected to drop to 200 thousand.
ECB President Mario Draghi signaled cautious optimism at a press conference on Thursday. The DAX responded with a thumbs-up and has climbed back above the symbolic 12,000 level. As expected, the ECB held rates at 0.00% at its policy meeting. Draghi focused on nuances, noting that the central bank removed one phrase from its standard introductory statement – “using all the instruments available within its mandate”. Draghi added that the removal of this phrase means that the ECB “no longer has a sense of urgency in taking further actions …. prompted by the risk of deflation”. With growth and inflation showing signs of improvement, the ECB has been under pressure to tighten policy and reduce its asset-purchase program. Germany, in particular, is unhappy with the ECB’s ultra-loose policy and on Thursday, German Finance Minister Wolfgang Schaeuble bluntly stated that he wanted to see a “timely start to the exit” from the ECB’s asset-purchase scheme. For his part, Mario Draghi must balance the improving economy with upcoming elections in France, Germany and the Netherlands. Euro-skeptics are a strong force throughout Europe and Draghi is reluctant to make any moves which could be seized on by politicians. The ECB’s asset-purchase program is slated to end in December, but economic and political circumstances could trigger an earlier end to the program.
After raising rates in December, the Fed 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
Economic Calendar
Friday (March 10)
- 2:00 German Trade Balance. Estimate 19.2B. Actual 18.5B
- 2:00 German WPI. Estimate 0.3%. Actual 0.5%
- 2:45 French Industrial Production. Estimate +0.6%. Actual -0.3%
- 4:00 Italian Quarterly Unemployment Rate. Estimate 11.6%
- Day 2 – ECOFIN Meetings
- 8:30 US Nonfarm Employment Change. Estimate 185K
*All release times are EST
*Key events are in bold
DAX for Friday, March 10, 2017
DAX, March 10 at 6:40 EST
Open: 12,020.50 High: 12,067.07 Low: 12,007.43 Close: 12,059.75