Dax Index News: Today’s Forecast Hinges on German GDP, ECB and US Fed Moves

DAX Rebounds as Trade Deal Removes Uncertainty

Sentiment toward the US-EU trade deal turned from disappointment to relief, with the German economy likely to weather a 15% US tariff. The DAX rallied 1.03% on Tuesday, July 29, reversing Monday’s 1.02% loss to close at 24,217.

The EU averted a full-blown trade war with the US by accepting a 15% tariff and zero tariffs on strategic goods, including aircraft, chemicals, critical raw materials, pharma, and semiconductors.

Daniel Kral, a Europe macro specialist, commented:

“There are different interpretations of EU-US deal (including by those in charge). Key uncertainty is around tariffs on pharma, chemicals and aircraft, and potential quotas for select metals and products. In any case, US tariffs are going up by a lot…”

Sector Snapshot: Aerospace and Defense Stocks Shine

Rheinmetall AG surged 3.46% on July 29, while MTU Aero rallied 3.45% as investors continued to react to the US-EU trade deal that included zero tariffs on aircraft and related components. Airbus Group closed the session up 1.02%.

Tech stocks also benefited from the trade deal. Infineon Technologies and SAP advanced 1.39% and 1.8%, respectively.

However, the auto sector extended its losses amid concerns that a 15% tariff could sink US demand for German cars. Volkswagen slid 1.28%, with Mercedes-Benz Group and Porsche also posting losses.

German Economy in the Spotlight

As the dust settles from the US-EU trade agreement, investor focus will now turn to key economic indicators. Economists forecast German retail sales to rise 0.5% month-on-month in June after May’s 1.6% slide. A pickup in consumer spending could ease concerns about a tariff-induced recession, lifting retail stocks. Conversely, another decline in retail sales may pressure the Index.

However, German GDP numbers will likely have more weight. Economists expect Germany’s economy to contract 0.1% quarter-on-quarter in Q2 after expanding 0.4% in Q1.

A sharper contraction and concerns about the potential impact of the US-EU trade deal on demand for German goods could weigh on DAX-listed stocks. On the other hand, an unexpected expansion may lift sentiment.

Wall Street Drops Ahead of the Fed’s Rate Decision

US markets posted losses on July 29 as market focus shifted to the Fed’s interest rate decision and Fed Chair Powell’s press conference. The Nasdaq Composite Index and the S&P 500 dropped 0.38% and 0.30%, respectively, while the Dow fell 0.46%.

Recent US economic data have signaled a robust US economy, easing bets on multiple Fed rate cuts. Consumer Confidence Index rose from 95.2 in June to 97.2 in July, signaling a potential pickup in spending. Given that private consumption accounts for over 60% of the US GDP, rising consumption would cool recession fears but may fuel demand-driven inflation. A higher inflation outlook could temper Fed rate cut bets.

Additionally, concerns about tariffs fueling inflationary pressures could leave the Fed in a policy holding pattern through the remainder of the year.

A more hawkish Fed rate path could raise borrowing costs, impacting corporate earnings and share prices.

US Labor Market and GDP Data in Focus

Later in the Wednesday session, US economic data will fuel speculation about the timeline for a Fed rate cut. Economists expect the ADP to report a 78k rise in employment in July, reversing June’s 33k drop. Steady labor market conditions may bolster wage growth, supporting consumer spending. On the other hand, another fall could boost Fed rate cut bets, raising demand for risk assets such as the DAX.

Meanwhile, economists forecast the US economy to expand 2.4% quarter-on-quarter in Q2 after contracting 0.5% in Q1. A sharp pickup in economic momentum could bolster demand for risk assets but allow the Fed to delay cutting rates. Conversely, softer-than-expected numbers may impact the DAX.

Beyond the data, markets will be mindful of the Fed’s interest rate decision and press conference, taking place after the European market close.

Outlook: Key Catalysts for the DAX

The DAX’s near-term outlook hinges on German data, US stats, and ECB chatter.

• Bullish Case: Positive German data, upbeat US economic indicators, and dovish ECB cues. These factors could send the DAX toward its record high of 24,639 and potentially 25,000.
• Bearish Case: Softer economic indicators or hawkish ECB cues may drag the DAX toward 24,000, potentially exposing the 50-day Exponential Moving Average (EMA).

At the time of writing on July 30, the DAX futures rose 61 points, while the Nasdaq 100 was up 52 points. Hopes that German companies can absorb new US trade terms bolstered risk sentiment.

DAX Technicals

Despite a choppy start to the week, the DAX remains above its 50-day and 200-day Exponential Moving Averages (EMA), signaling bullish momentum.

• Upside Target: A breakout above 24,350 could bring 24,500 into play. A sustained move through 24,500 could enable the bulls to target the July 10 record high of 24,639.
• Downside risk: A drop below 24,000 could signal a fall toward the 50-day EMA.

The 14-day Relative Strength Index (RSI), at 53.62, indicates the DAX could climb to 24,639 before entering overbought territory (RSI > 70).

DAX Outlook Summary: US-EU Trade Talks and Central Bank Guidance

Traders should consider trade headlines, crucial economic data, corporate earnings, and central bank commentary, with the economic indicators likely to dominate.

Explore our exclusive forecasts to assess whether improving trade sentiment could lift the DAX to new highs. Refer to our latest forecasts and macro insights here for further analysis, and consult our economic calendar.