DAX: Ifo Weak Data – ECB Member Calls for Lower Rates
Monday trading opens mixed as the market sees lower than expected Ifo Conditions and Business Climate, while Expectations were slightly higher. ECB Lane quoted as saying further monetary loosening is needed.
- Ifo data mixed but weak overall
- ECB’s Lane calls for lower rates
- Euro tumbles to 2-year lows
The DAX opened with mixed trading today, up 0.30% from Friday’s close but down on the day.
Ifo data showed a sharper than expected decline in Business Climate and Conditions. The first came in at 84.3, when analysts expected 85.4, while Current Conditions printed at 85.7, with most forecasts at 86.
The only positive surprise came from expectations, which was expected at 87 and printed 87.2. The data adds to the ongoing weak sentiment for the German economy.
At the top of the concerns are a possible trade tariff war and weak demand from China for consumer goods.
The EUR/USD fell to levels not seen in 2 years, dipping to 1.0330 before recovering. A weak currency may help the stock market as products and services become cheaper for exporters.
ECB Under Pressure to Loosen Faster
Today’s edition of French newspaper Les Echos quoted board member Lane as saying monetary policy should not remain restrictive for too long.
“Otherwise, the economy will not grow sufficiently, and inflation will, I believe, fall below the target.”
The market now sees a 50% chance that the ECB will cut rates at its next policy meeting on December 12. Lane also warned that inflation expectations were not totally under control. Adding that services price growth is too growth and most of the decline recently was due to energy prices.
Economists see data, due this week, to show the Eurozone inflation declining from 2.4% to 2.0%. Confirmation of that could pave the way for a bumper 50 basis point rate cut from the ECB.
Technical View
The day chart above for the DAX shows a bullish trend with prices above the Ichimoku cloud. Recent trading activity saw a decline to the cloud, where the market found substantial support.
Today’s open has created a gap, which could lead to higher prices if the gap is confirmed. The market will find resistance at the all-time high of 19,681 (blue line).
While support will come from the cloud and the previous high of 18,994 (red line). Failure to break above the resistance could lead to a retracement to the support area. This move would confirm a growing sideways trend.
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