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The DAX Gains As Euro Weakens

Published 11/11/2015, 06:34 AM
Updated 04/25/2018, 04:10 AM

The DAX opened upbeat in Frankfurt. Henkel and Adidas (DE:ADSGN) lead the early gains. Depreciation in euro against both the US dollar and the pound encourages demand in export-driven German stocks.

Henkel (DE:HNKG_p) beat earnings estimates in the 3Q, while printing a greater-than-expected fall in its sales from 4.695 billion to 4.590 billion euro. Nevertheless the company raised its profit target in 2015 on the back of a surprise jump in Persil sales in the emerging markets. Prospects for a cheaper euro is also convincing for expansion of activity in the US as there is business to be grasped from the Procter & Gamble (N:PG) presently dominating the North American market. Chinese market is still a leading potential for the business and despite the Chinese slowdown, the 6.5% growth in organic sales is reassuring.

Euro cheapens, pound recovers

The euro shortly slipped below 1.07 versus the US dollar in New York yesterday, Asia pulled the single currency higher as indication that demand in euro funding is settling back. Top sellers chase opportunities in euro-crosses however, as dovish ECB expectations for December and political issues in Portugal keep the sentiment comfortably negative vis- à-vis the euro.

The idea that the Fed is moving toward a rate hike by December could even bring the parity on the radar.

Cable recovered two-thirds of last week’s post-QIR losses, yet remains technically in the bearish trend. Given the Bank of England’s dovish shift in inflation and growth forecasts, the improvement in the labour market is expected to be insufficient to twist the presently developing bearish trend in Cable.

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On the other hand, EUR/GBP still points to 0.70c mid-term target. The European Central Bank has been successful in managing the market activity so far. Prospects that the ECB will further loosen the monetary policy with the possibility of more QE and even deeper negative rates, keep traders away from building on their long euro positions.

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