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- The ECB’s stance on Germany’s fiscal policy and defense fund.
- Tariff developments.
- Inflation outlook and economic forecasts.
- Forward guidance on additional rate cuts.
A hawkish rate cut could weigh on the DAX, while dovish guidance—signaling further rate cuts—could support risk assets.
Daniel Kral, macro specialist on Europe at Oxford Economics, highlighted the uncertainty surrounding the ECB’s policy outlook, stating:
“Lower interest rates and improved demand outlook are feeding into bank loans to the private sector in the Eurozone. But expect disagreements on ECB council about when to pause/stop with rate cuts to intensify.”
US Markets Recap: Tariff Relief Lifts Sentiment
On Wednesday, March 5, US equity markets rallied on optimism toward tariff relief. The Dow and the S&P 500 climbed 1.14% and 1.12%, respectively, while the Nasdaq Composite Index gained 1.46%.
Tariff developments offset the impact of mixed US economic data on risk sentiment.
- The US ISM Services PMI increased to 53.5 in February, up from 52.8 in January, driven by higher employment and prices.
- ADP Jobs Report showed a 77k jobs rise in February, down from 186k in January, raising concerns over labor market weakness.
US Labor Market in Focus
Turning to the US session, jobless claims require consideration ahead of Friday’s US Jobs Report. Economists forecast initial jobless claims to fall from 242k (week ending February 22) to 235k (week ending March 1).
- A lower jobless claims reading could weaken expectations for a June Fed rate cut, putting pressure on risk assets.
- Another rise in claims may reinforce expectations for monetary easing, potentially driving demand for DAX-listed stocks.
Beyond the data, traders should monitor tariff developments. President Trump previously threatened 25% tariffs on EU goods. Renewed focus on EU trade terms could weigh on market sentiment.
Meanwhile, progress toward a German defense fund and fiscal policy changes could offset tariff concerns, benefiting aerospace, industrial, and military stocks.
Near-Term Outlook
The DAX’s near-term trajectory will depend on the ECB, tariff developments, and fiscal policy shifts:
- Bearish Scenario: Rising US-EU trade tensions, limited fiscal progress in Germany, and a hawkish ECB could push the DAX toward 22,750.
- Bullish Scenario: A dovish ECB stance, easing trade tensions, and fiscal policy advancements could drive the DAX toward 23,500.
As of Thursday morning, US futures pointed to a mixed session, with the Nasdaq 100 mini down 27 points.
DAX Technical Indicators
Daily Chart
After Wednesday’s rebound, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs). Recent trends indicate heightened volatility, even as the broader trend remains bullish.
If the DAX returns to Monday’s record high of 23,308, the bulls could target 23,500 next. A breakout from 23,500 may signal a move toward 23,750.
Conversely, a DAX break below 23,000 could enable the bears to target 22,750. A fall through 22,750 would bring 22,500 into sight.
The 14-day Relative Strength Index (RSI) at 64.47 suggests the DAX could rise to Monday’s high before nearing overbought territory (RSI > 70).
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