DAX Index Today: German Inflation, the ECB, and the US CPI Report

The Overview of the DAX Performance

On Tuesday (June 11), the DAX declined by 0.68%. Following a 0.34% loss on Monday (June 10), the DAX ended the session at 18,370.

Hawkish ECB Chatter and French Politics Pressure the DAX

ECB Chief Economist Philip Lane poured cold water on hopes of a July ECB rate cut. On Tuesday, Lane warned the ECB would wait until inflation uncertainties subsided before cutting rates again.

The ECB Chief Economist highlighted that wage growth remained a concern alongside services inflation.

French politics and investor caution before the US CPI Report and FOMC Economic Projections contributed to the losses. Considering the trends across the US equity markets, French politics impacted market risk appetite more.

French President Emmanuel Macron called for a snap general election, raising the threat of a far-right government and EU Project instability.

There were no US economic indicators on Tuesday, allowing investors to shift their focus to the looming US CPI Report and the Fed interest rate decision.

On Tuesday, the US equity markets had a mixed session. the Dow declined by 0.31%. However, the S&P 500 and the Nasdaq Composite Index saw gains of 0.88% and 0.27%, respectively.

The Tuesday Market Movers

German banks tracked French banks deep into negative territory for a second successive session on Tuesday. Commerzbank and Deutsche Bank slid by 3.29% and 3.17%, respectively.

Retail stocks also extended their losses from Monday. Adidas and Zalando SE saw losses of 1.70% and 1.59%, respectively.

Risk aversion affected buyer demand for tech stocks. Infineon Technologies and SAP declined by 0.17% and 0.80%, respectively.

Auto stocks tracked the broader market into negative territory. Porsche and Volkswagen declined by 0.77% and 1.02%, respectively. Daimler Truck Holding fell by 0.31%, with BMW ending the session down 0.20%. Mercedes Benz Group dropped by 0.17%.

German Inflation, the ECB, and French Politics

On Wednesday, finalized German inflation figures warrant investor attention. Upward revisions to the preliminary numbers could affect investor expectations of a July ECB rate cut.

According to the preliminary inflation report, the annual inflation rate rose from 2.2% to 2.4% in May.

Furthermore, investors should track ECB commentary following the comments from Chief Economist Philip Lane on Tuesday. Views on inflation, the economic outlook, French politics, and the interest rate trajectory need consideration.

ECB Executive Board members Anneli Tuominen, Isabel Schnabel, Claudia Buch, Luis de Guindos, and Elizabeth McCaul are on the calendar to speak.

US CPI Report in Focus Before the FOMC Interest Rate Decision

Later in the session, the all-important US CPI Report will require investor consideration.

Economists forecast the US annual inflation rate to remain at 3.4% in May. Additionally, economists expect the core inflation rate to ease from 3.6% to 3.5%.

Hotter-than-expected inflation numbers could further reduce investor bets on a September Fed interest rate cut. Moreover, the DAX will likely show more sensitivity to the report, with the FOMC delivering its interest rate decision and economic projections after the European closing bell.

The markets expect the Fed to stand pat on Wednesday. However, uncertainty lingers about the Fed rate path, with US wage growth and sticky inflation likely concerns for the Fed. The increased level of uncertainty will likely put the FOMC economic projections and the press conference in the spotlight.

Near-Term Outlook

Near-term trends for the DAX will hinge on ECB chatter, geopolitics, the US CPI Report, and the Fed. Hotter-than-expected US inflation numbers and more hawkish FOMC economic projections could send the DAX toward 18,000.

On the Futures markets, the DAX and the Nasdaq mini were up 23 and 4 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX hovered above the 50-day and 200-day EMAs, affirming the bullish price signals.

A DAX return to the 18,500 level could signal a move toward the 18,650 handle. A breakout from 18,650 could bring 18,800 into play.

German inflation numbers, ECB commentary, US inflation figures, and geopolitics need consideration.

Conversely, a DAX break below the 50-day EMA could give the bears a run at 18,250. A fall through 18,250 would bring the 18,000 handle into play.

The 14-day RSI at 44.78 indicates a drop to 18,000 before entering oversold territory.

4-Hourly Chart

The DAX sat below the 50-day EMA while remaining above the 200-day EMA, confirming the bearish near-term but bullish longer-term price trends.

A DAX breakout from 18,500 would give the bulls a run at the 50-day EMA. A move through the 50-day EMA could signal a return to the 18,650 handle.

However, a DAX fall below the 18,250 handle could signal a drop to the 200-day EMA.

The 14-period 4-hour RSI at 40.00 suggests a DAX fall to the 200-day EMA before entering oversold territory.