DAX – Steady as Markets Eye Dutch Vote, Fed Meeting

The DAX Index continues to hug the 12,000 level this week. In the Wednesday session, the DAX is at 11,989.50. On the release front, Eurozone Employment Change edged up to 0.3%, above the forecast of 0.2%. In the US, today’s highlight is the Federal Reserve policy meeting, with the central bank widely expected to raise the benchmark rate a quarter-point, from 0.50% to 0.75%. On Thursday, the eurozone releases Final CPI, with the markets expecting the index to improve to 2.0%.

German numbers were a mixed bag on Tuesday. There was further indication that inflation continues to improve, as Final CPI rebounded with a gain of 0.6%, compared to a 0.6% decline a month earlier. The well-respected ZEW Economic Sentiment report improved to 12.8, although the markets had expected a stronger reading. Eurozone ZEW Economic Sentiment climbed to 25.6, its strongest gain since December 2015.

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 are having their say on Wednesday, while France holds elections in April, followed by Germany in September.

More job numbers out of the US, more good news for the economy. Nonfarm payrolls sparkled in February, as the indicator jumped to 235 thousand, easily beating the estimate of 196 thousand. The excellent NFP report makes it a virtual certainty that the Fed will raise rates by a quarter-point on Wednesday. Although a rate hike has been priced in by the markets at 93%, there have been disappointments in the past, so a rate move will likely give the dollar a boost against its major rivals, such as the euro. The solid job numbers also give President Trump a much-needed boost. Trump is under pressure to present an economic agenda, but the markets won’t mind giving him some additional breathing room with the economy performing well.

Fed to Walk the Talk

Economic Calendar

Wednesday, March 15

• 3:45 French Final CPI. Estimate 0.1%. Actual 0.1%
• 5:00 Italian Retail Sales. Estimate 0.1%. Actual 1.4%
• 6:00 Eurozone Employment Change. Estimate 0.2%. Actual 0.3%
• Tentative – German 30-y Bond Auction
• 14:00 US Federal Funds Rate. Estimate <1.00%
• 14:00 US FOMC Press Conference

Upcoming Key Events

Thursday, March 16

• 6:00 Eurozone Final CPI. Estimate 2.0%

*All release times are EST

*Key events are in bold

DAX for Wednesday, March 15, 2017

DAX, March 15 at 7:45 EST

Open: 12,000.50 High: 12,028.50 Low: 11,978.00 Close: 11,989.50

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