DAX Higher, Markets Eye ECB Meeting

The DAX index has posted gains in the Tuesday session. Currently, the DAX is trading at 12,614 points, up 0.33% on the day. On the release front, German Ifo Business Climate dropped sharply to 102.1, missing the estimate of 102.7 points.

Is the German locomotive in trouble? German business confidence took a hit in April, as Ifo Business Climate fell to 102.1 points, down from 114.7 points a month earlier. This marks the lowest level since November 2012. German key indicators have softened recently, pointing to a slowdown in economic conditions in the first quarter. We’ll get a look at the mood of consumers, with the release of German GfK Consumer Climate on Thursday.

The US dollar started the week with broad gains and has pushed the euro down to 8-week lows. The catalyst for the greenback rally was higher yields for 10-year US treasury bills, which rose to 2.996% on Monday. Higher yields for US T-bills have made them more attractive than European or Japanese counterparts. With oil pushing above $70 a barrel, there are concerns that inflation will rise, which has pushed bond prices lower and yields upwards. The dollar has also benefitted from a reduction in geopolitical risk, with an easing of tensions between North and South Korea, and a lull in the conflict in Syria.

The markets are keeping a close eye on the ECB, which holds a policy meeting on Thursday. Despite stronger economic conditions in the eurozone, the ECB has been in cautious mode. At the March meeting, policymakers took a small step, dropping a pledge to increase stimulus if needed. Will we see additional ‘baby’ steps at the April meeting? The markets are not expecting any change in forward guidance, and concerns over recent trade disputes could mean a dovish statement from ECB President Mario Draghi. Traders shouldn’t expect any dramatic moves at the rate meeting, as the bank will likely continue to preach patience and prudence.

USD Back with a vengeance

Economic Fundamentals

 Tuesday (April 24)

• 4:00 German Ifo Business Climate. Estimate 102.7. Actual 102.1

*All release times are DST

*Key events are in bold

DAX, Tuesday, April 24 at 6:45 DST

Prev. Close: 12,572 Open: 12,589 Low: 12,567 High: 12,648 Close: 12,614

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