DAX takes pause from recent gains

The DAX index has posted losses in the Thursday session. Currently, the DAX is at 12,715 down 0.39% on the day. Still, the DAX is in green territory this week, with gains of 1.4 percent. On the release front, there are no major German or eurozone events. On Friday, German PPI is expected to dip to 0.3% and the eurozone current account surplus is forecast to narrow to EUR 27.2 billion.

Eurozone inflation continues to move upwards and reached a milestone in June, with a gain of 2.0%. This was the first time inflation hit the 2.0% threshold since February 2017. On an annualized basis, Final CPI also came in at 2.0%. The ECB has said it will taper its monthly bond purchases to EUR 15 billion in September and wind up the program completely in December. With this stimulus program on its last legs, attention has focused on whether the ECB will raise interest rates. A rate hike would likely have a significant impact on the markets, as the ECB last raised rates back in 2011. If inflation levels continue to rise, there will be more pressure on the ECB to consider a rate hike sooner rather than later.

Fed Reserve Chair Jerome Powell reaffirmed his positive outlook on the U.S economy in testimony before the Senate Banking Committee earlier this week. Powell said that he expected the labor market to remain tight and inflation to stay close to the Fed’s target of 2 percent for the next several years. Powell added that the Fed would continue to gradually raise interest rates. Lawmakers appeared satisfied with current monetary policy, but Powell did face some pointed questions regarding the escalating trade war, which has raised concerns that economy could take a downturn if the tariff battles continue.

Economic Calendar

Thursday (July 19)

• There are no German or eurozone events

Friday (July 20)

• 2:00 German PPI. Estimate 0.3%
• 4:00 Eurozone Current Account. Estimate 27.2B

*All release times are DST

*Key events are in bold

DAX, Thursday, July 19 at 6:45 DST

Previous Close: 12,765 Open: 12,740 Low: 12,693 High: 12,758 Close: 12,715

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