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DAX Edges Higher, Investors Eye German CPI

The DAX index has posted slight gains in the Wednesday session. Currently, the index is at 12,539, up 0.10% on the day. In economic news, German GfK Consumer Climate edged lower to 10.5, shy of the estimate of 10.6 points. In the U.S, Preliminary GDP in the second quarter is expected at 4.0%. The previous GDP report came in at 4.1% in July. On Thursday, Germany releases Preliminary CPI.

The DAX showed gains on Monday, in response to an unexpectedly strong business confidence report in Germany. The Ifo Business Climate report improved to 103.8, easily beating the estimate of 101.9 points. This marked the first time this year that business confidence has improved, thanks to a strong German economy and a pause in the global trade war. On Wednesday, the news was less positive, as German GfK Consumer Climate dropped from 10.6 to 10.5 points, continuing the downward trend which has marked 2017. Back in January, the indicator was at 11.0 points, underscoring a decrease in consumer confidence.

It’s been a rough August for the DAX, which has dropped 2.2%. Still, with the ECB unlikely to raise interest rates in the near future, investors may prefer the equity markets over the euro. The currency was last above the 1.20 line in May, and this symbolic level could remain elusive for quite some time. The reason? Mario Draghi and his ECB colleagues continue to send out the message that the ECB has no plans to raise rates until after the summer of 2019. The markets are not expecting a rate hike before October 2019, which means that the euro is not particularly attractive unless there is an unexpected improvement in the German and eurozone economies.

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