Dax Index News: Forecast Turns Upbeat Ahead of, ECB Minutes and US Jobs Report

DAX Targets 24,000 as US Strikes Trade Deal, ECB and Fed Policies in Focus

The Vietnam signs a trade deal with US, dropping tariffs on US goods to zero. Reports of the trade deal boosted expectations of a US-EU trade deal and lifted sentiment on Thursday, July 3. The DAX rose 0.40% to 23,885 in early trading, extending its gains from Wednesday.

President Trump announced a US-Vietnam trade deal on July 2, stating:

“The Terms are that Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping.”

Notably, Vietnam agreed to zero tariffs on US goods.

The EU could agree with a similar deal or face Liberation Day tariffs. EU trade chief will be in Washington to avoid higher tariffs.

Meanwhile, a higher Eurozone unemployment rate could increase ECB rate cut bets. The unemployment rate unexpectedly increased to 6.3% in May, up from 6.2% in April.

Sector Performance: Trade Deal Hopes Drive Autos and Tech

Infineon Technologies jumped 2.94% at the open. Continental AG climbed 1.24%, while Volkswagen, Porsche, Mercedes-Benz Group, and BMW also posted early gains. Optimism about a US-EU trade agreement with minor tariffs on EU goods drove demand.

ECB Monetary Policy Meeting Minutes to Give Insights into Rate Cut Timelines

While trade developments remain key, the ECB’s monetary policy meeting minutes require consideration on July 3. The minutes could reveal conditions for further rate cuts. The Eurozone annual inflation rate edged higher in June, tempering rate cut bets. However, the ECB’s stance on tariffs could be crucial.

Support for delaying rate cuts would likely affect rate-sensitive DAX-listed stocks, while hints of further rate cuts could lift sentiment.

Beyond the minutes, trade developments and ECB commentary will continue to influence DAX trends.

Wall Street Extends Gains as Fed Rate Cut Bets Rocket

US markets posted mixed performances on July 2 as investors considered trade developments and labor market data. The Dow slipped 0.01%, while the Nasdaq Composite Index and the S&P 500 gained 0.94% and 0.47%, respectively.

The ADP reported a 33k drop in private employment in June, reversing a 29k rise in May. Wednesday’s data raised expectations of Fed easing, boosting demand for risk assets such as the DAX.

According to the CME FedWatch Tool, the chances of a September Fed rate cut rose from 91.7% on July 1 to 96% on July 2.

US Jobs Report to Spotlight the Fed

Later in the Thursday session, the crucial US Jobs Report will influence the Fed’s policy outlook and risk sentiment. Economists forecast a 110k increase in nonfarm payrolls in June after rising 139k in May. Additionally, economists expect average hourly earnings to rise 3.9% year-on-year, mirroring May’s increase and a 4.3% unemployment rate, up from 4.2% in May.

Rising unemployment, softer wage growth, and a lower nonfarm payroll reading could fuel bets on a July Fed rate cut. A more dovish Fed rate path may lift demand for equities. Conversely, higher wages, a steady unemployment rate, and stronger-than-expected nonfarm payrolls may signal a less dovish Fed stance, potentially testing risk sentiment.

While labor market data will be crucial, services sector PMI numbers also need consideration. Economists forecast the ISM Services PMI to rise from 49.9 in May to 50.5 in June. A move above the 50 neutral level would ease recession fears. However, a lower print may revive recessionary risks, impacting risk assets.

Notably, rising recession risks may overshadow increasing expectations of a Fed rate cut.

Near-Term Outlook

The DAX’s trajectory hinges on US-EU trade headlines, US economic data, and central bank signals.

• Bearish Scenario: Stalled US-EU trade talks, strong US Jobs Report, rising US recession risks, 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 US labor market data, easing recession risks, and dovish central bank signals may drive the DAX toward 24,000.

DAX Technical Indicators

Daily Chart

Despite this week’s pullback, the DAX trades above the 50-day and 200-day Exponential Moving Averages (EMA), indicating a bullish bias.

A breakout from 24,000 could pave the way toward 24,150. Sustained upward momentum could bring the June 5 high of 24,479 into play.

On the downside, a break below 23,500 and the 50-day EMA may enable the bears to target the crucial 23,000 support level.

The 14-day Relative Strength Index (RSI), at 54.59, indicates the DAX could move to 24,479 before entering overbought territory (RSI > 70).

Final Thoughts

Volatility could persist as investors assess trade news, key economic data, and central bank signals. Fiscal developments may further influence sentiment.

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