DAX trading sideways as investors look for cues

The DAX index is almost unchanged in the Friday session. Currently, the DAX is at 12,679, down 0.06% on the day. On the release front, German PPI dipped to 0.3%, matching the estimate. The eurozone current account surplus dropped sharply to 22.4 billion. This was well short of the forecast of 27.2 billion and the lowest surplus since June 2017.

After years of monetary stimulus to boost the eurozone economy, the ECB is close to phasing out its asset-purchase program. The ECB plans to trim its monthly purchases from EUR 30 billion to 15 billion in September and wind up the program in December. Is a rate hike next on the menu? Any clues of a change in monetary policy are bound to affect the euro, as the ECB has not raised rates since 2011. Many analysts are predicting a rate hike in the second half of 2019. However, growing global trade tensions could put a wrinkle in plans to raise rates. The European Commission and the International Monetary Fund have lowered 2018 growth forecasts for the eurozone and for Germany. If the tariff slugfest continues, the euro will likely continue to lose ground.

The eurozone economy is in good shape and stronger growth has resulted in higher inflation levels. In June, euorozone CPI improved to 2.0%, reaching this symbolic level for the first time since February 2017. On an annualized basis, Final CPI also came in at 2.0%. If inflation levels continue to rise, there will be pressure on the ECB to consider raising interest rates, although this is an unlikely scenario before next year. The DAX has enjoyed a strong July, posting gains of 4.3%.

Yuan’s fall extends to a fourth straight day

Economic Calendar

• 2:00 German PPI. Estimate 0.3%. Actual 0.3%

• 4:00 Eurozone Current Account. Estimate 27.2B. Actual 22.4B

Previous Close: 12,686 Open: 12,662 Low: 12,638 High: 12,697 Close: 12,685