DAX Shrugs off Strong Eurozone Final CPI

The DAX Index has edged lower in the Thursday session. Currently, the DAX is at 12,129.05. On the release front, Eurozone Final CPI improved to 2.0%, matching the forecast. Eurozone Final Core CPI also matched its estimate, remaining at 0.9%. It’s a busy day in the US, with the release of three key indicators – Building Permits, Philly Fed Manufacturing Index and unemployment claims. The week wraps up with consumer confidence data, with the release of UoM Consumer Confidence on Friday.

There were no raised eyebrows when the Federal Reserve raised rates by a quarter-point on Wednesday. The hike, the second in just three months, raised the raised the benchmark lending rate to a 0.75%-1% range. What was not expected, however, was the sharp drop of the dollar against its major rivals, including the euro. The markets were hoping that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening. There was disappointment as Fed Chair Janet Yellen reiterated that further rate hikes would be done gradually, pushing the dollar on Wednesday.

The eurozone continues to post improved inflation and growth data, and this has led to calls in some quarters for the ECB to tighten monetary policy. The ECB has kept the benchmark rate at a flat 0.0%, and its asset-purchase program does not expire until December. Will ECB President Mario Draghi taper the monthly purchases or at least signal such an intent? Draghi is doing his best to perform a complicated balancing act. A stronger economy would favor tighter policy, but he does not want ECB to become entangled in heated political contests in Europe. Dutch voters went to the polls on Wednesday, and France and Germany will hold elections in April and September, respectively.

Governments across Europe breathed a sigh of relief following the results of the election in the Netherlands. The centre-right coalition of Prime Minister Mark Rutte won the most votes, handily defeating the anti-EU Freedom Party, headed by Geert Wilders. The election was closely watched across Europe, as it was viewed as a bellwether of populist sentiment on the continent. Leaders in France and Germany, who are also facing tight races due to rising anti-EU sentiment, are hopeful that they can copy Rutte’s recipe for electoral success. The election results have helped push the euro to its highest level February 5.

Economic Calendar

Thursday (March 16)

• 5:46 Spanish 10-year Bond Auction. Actual 1.94%
• 6:00 Eurozone Final CPI. Estimate 2.0%. Actual 2.0%
• 6:00 Eurozone Final Core CPI. Estimate 0.9%. Actual 0.9%
• 8:30 US Building Permits. Estimate 1.26M
• 8:30 US Philly Fed Manufacturing Index. Estimate 30.2
• 8:30 US Unemployment Claims. Estimate 245K
• 8:30 US Housing Starts. Estimate 1.26M
• 10:00 US JOLTS Openings. Estimate 5.45M
• 10:30 US Natural Gas Storage. Estimate -60B

Friday (March 17)

• 5:00 Italian Trade Balance. Estimate 3.45B
• 6:00 Eurozone Trade Balance. Estimate 22.3B

*All release times are EST

*Key events are in bold

DAX for Thursday, March 16, 2017

DAX, March 16 at 6:40 EST

Open: 12,164.00 High: 12,164.00 Low: 12,105.50 Close: 12,129.05

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