Dax Index News: DAX Eyes 24,500 on Softer Inflation Outlook and Fed Signals

DAX Charges Ahead on Eurozone Optimism, Shrugs Off Tariff Fears

Amid growing trade tensions and inflation uncertainty, the DAX finds itself at a turning point. Crucial GDP numbers for the Eurozone suggested the economy should be able to absorb the impact of tariffs. The DAX climbed 0.32% to 24,340 in early trading on Thursday, July 31, following Wednesday’s 0.19% gain.

The Eurozone economy expanded 0.1% quarter-on-quarter (QoQ) in Q2, slowing from 0.6% growth in Q1 but above a predicted stall. Germany’s economy contracted by 0.1% in Q2, in line with forecasts.

However, Fred Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management, warned of the potential impact of tariffs, stating

The ECB will argue that the US trade deal reduces uncertainty, but a tariff shock is still coming. The drag on growth is worth ~40bp even without pharma. Meanwhile wages and inflation are slowing, China adds to the risks, and the EUR is stronger. No reason to be hawkish.”

Stalled US-China trade talks leave levies on Chinese shipments to the US, potentially forcing exporters to consider the EU as a trading route.

Tech Stocks Rally Amid Tariff and Fed Uncertainty

Tech stocks posted early gains on July 31 amid Fed policy signals, tariff developments, and upcoming inflation numbers. Infineon Technologies and SAP climbed 0.72% and 1.64%, respectively.

However, auto shares came under selling pressure. BMW slid 1.02%, with Mercedes-Benz, Porsche, Volkswagen also posting early losses. Concerns over tariffs and oversupply from China weighed on sentiment.

German Inflation Data Set to Influence ECB Policy Outlook

While investors will react to Fed Chair Powell’s overnight press conference, German inflation data could affect the ECB’s policy stance. Economists forecast the annual inflation rate to drop from 2% in June to 1.9% in July, below the ECB’s 2% target.

Softer inflation may raise expectations of an ECB rate cut, boosting demand for DAX-listed stocks. Conversely, a higher inflation reading may weigh on risk assets.

Other stats include unemployment figures for Germany and the Eurozone. However, these will likely play second fiddle to the inflation data.

Powell Dials Back Rate Cut Hopes, Roils Wall Street

US markets posted mixed performances on Wednesday, July 30. Better-than-expected US economic data lifted sentiment early in the session. However, Fed Chair Powell’s hawkish stance pressured risk assets.

The Dow and the S&P 500 fell 0.38% and 0.12%, respectively, while the Nasdaq Composite Index gained 0.15%.

The US economy grew 3% quarter-on-quarter in the second quarter, rebounding from a 0.5% contraction in the first quarter. Labor market data also lifted sentiment. The ADP reported a 104k rise in employment in July after falling 23k in June.

However, Fed Chair Powell poured cold water on expectations for a September Fed rate cut, dampening investor appetite. Powell said it was too early to commit to a rate cut, noting that inflation remained elevated and labor market conditions remained solid.

According to the CME FedWatch Tool, the chances of a September rate cut fell from 64.6% on July 29 to 43.2% on July 30.

Markets Brace for US Spending and Inflation Data

Later in the Thursday session, US inflation figures could influence sentiment toward the Fed rate path. Economists expect the Core PCE Price Index to rise 2.7% year-on-year in July, mirroring June’s increase. A higher reading would support Fed Chair Powell’s wait-and-see policy stance, weighing on risk sentiment. On the other hand, a lower inflation print may revive hopes for a September Fed rate cut, boosting equities.

While the inflation numbers are key, personal income and spending figures also require consideration. A rebound in personal income and spending could signal a pickup in inflationary pressures, while a further decline would support a more dovish Fed policy stance.

Near-Term Outlook

The DAX’s near-term outlook depends on key economic data and central bank policy guidance.

• Bearish Scenario: Hotter inflation or hawkish central bank signals may drag the DAX toward 24,000, exposing the 50-day EMA.
• Bullish Scenario: Softer inflation and dovish central bank rhetoric could drive the DAX toward 24,500, bringing the July record high of 24,639 into sight.

DAX Technical Indicators

Daily Chart

Despite trade developments, the DAX remains above the 50-day and 200-day Exponential Moving Averages (EMA). The EMAs signal bullish momentum.

A breakout above 24,350 could pave the way to 24,500. A sustained move above 24,500 may enable the bulls to target the record high of 24,639.

On the downside, a break below 24,000 may expose the 50-day EMA.

The 14-day Relative Strength Index (RSI), at 56.16, suggests the DAX could climb to 24,639 before entering overbought territory (RSI > 70).

Final Thoughts

Overall, the DAX remains at a critical juncture, with key economic data likely to influence central bank policy guidance and determine the index’s next move.

Looking ahead, traders should monitor both technical and fundamental drivers and consult our economic calendar.