Dax Index News: Forecast Hinges on US-EU Trade Talks and ECB Rate Path Today

DAX Jump Toward 24,500 Hinged on US-EU Trade Deal

Hopes of a US-EU trade deal bolstered demand for DAX-listed stocks on Tuesday, July 1. The DAX climbed 0.25% to 23,971 in early trading. However, a lack of progress toward a balanced trade agreement capped the early gains.

Trade uncertainties overshadowed softer-than-expected German inflation figures. Germany’s annual inflation rate unexpectedly eased from 2.1% in May to 2% in June, dropping to the ECB’s 2% target.

Sector Performance

Auto stocks came under selling pressure as investors focused on trade developments. Mercedes-Benz Group dropped 0.59%, while BMW, Porsche, and Volkswagen also posted early losses.

Meanwhile, Adidas led the gains, rallying 1.52% in early trading, with online retailer Zalando rising 0.75%.

German Unemployment and Eurozone Inflation in Focus

While the market focus remains on trade developments, German labor market data and Eurozone inflation figures will influence the ECB rate path and sentiment on Tuesday, July 1.

Economists forecast a rise in Germany’s unemployment rate from 6.3% in May to 6.4% in June. Rising unemployment may impact consumer spending, potentially dampening demand-driven inflationary pressures. A cooler inflation outlook may raise expectations of multiple ECB rate cuts, boosting demand for rate-sensitive German stocks.

However, inflation numbers for the Eurozone may have a greater weight on risk appetite. Economists expect the Eurozone’s annual inflation rate to rise from 1.9% in May to 2% in June. A higher reading would take inflation above the ECB’s 2% target, easing bets on multiple H2 2025 ECB rate cuts. Conversely, a lower inflation reading may signal a more dovish ECB stance, supporting the DAX.

Beyond the numbers, trade developments and ECB commentary will continue to drive demand for German-listed stocks.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero remarked on European market trends, stating:

“The stock market optimism is due more to Trump’s political needs than to the EU’s true negotiating strength. Regarding inflation, there is room for further cuts from the ECB, given the Fed’s potential to postpone decisions until October due to the resilience of underlying inflation.”

Wall Street Extends Gains as Fed Rate Cut Bets Rocket

US markets extended their gains on June 30. The Dow climbed 0.63%, while the Nasdaq Composite Index and the S&P 500 posted gains of 0.47% and 0.52%, respectively.

Recent US economic data and Fed speakers have driven expectations of Fed rate cuts through the second half of the year. On June 30, Goldman Sachs revised its Fed calls for 2025, projecting a 25-basis point Fed rate cut in September and two further 25-basis-point cuts in October and December.

Commenting on the potential impact of tariffs on inflation, Goldman Sachs reportedly stated:

“The very early evidence suggests that the tariff effects look a bit smaller than we expected, other discretionary forces have been stronger, and we suspect the Fed leadership shares our view that tariffs will only have a one-time price level effect.”

According to the CME FedWatch Tool, the chances of a September Fed rate cut rose from 91.4% on June 27 to 94.7% on June 30.

US Labor Market and Manufacturing Sector in the Spotlight

Later in the session, US economic data could further fuel speculation about multiple Fed rate cuts in the second half of 2025.

Economists forecast JOLTs Job Openings to drop from 7.391 million in April to 7.3 million in May. A lower print may bolster expectations of a September Fed rate cut, supporting risk sentiment. On the other hand, a higher reading could signal a less dovish Fed stance, potentially pressuring risk assets such as the DAX.

With US tariffs remaining in effect, their impact on manufacturing sector activity will also draw interest. Economists expect the ISM Manufacturing PMI to edge up from 48.5 in May to 48.8 in June.

A continued contraction across the manufacturing sector may support a dovish Fed rate path. Conversely, a jump above the 50 neutral level could signal a pickup in economic momentum, testing expectations of multiple Fed rate cuts in H2 2025.

Near-Term Outlook

The DAX’s outlook depends on US-EU trade developments, Eurozone inflation, US labor market data, and central bank cues.

• Bearish Scenario: Stalled US-EU trade talks, better-than-expected economic data, or hawkish central bank guidance. Under these scenarios, the DAX could drop toward 23,500, exposing the 50-day EMA.
• Bullish Scenario: Progress toward a US-EU trade deal, softer economic data, and dovish central bank signals may drive the DAX toward the June 5 high of 24,479.

DAX Technical Indicators

Daily Chart

Despite Monday’s pullback, the DAX remains above the 50-day and 200-day Exponential Moving Averages (EMA), sending bullish price signals.

A breakout above 24,000 could signal a move toward 24,150. Sustained momentum may pave the way to the June 5 high of 24,479.

On the downside, a drop below 23,750 would bring 23,500 into play. Increased selling pressure may expose the 50-day EMA.

Final Thoughts

Volatility may persist as investors monitor trade developments, key economic data, and central bank commentary. Fiscal developments may further influence sentiment.

Traders should stay attuned to technical and fundamental drivers and consult our economic calendar.