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Eurozone Inflation Dips, DAX Climbs on Rate Cut Speculation

6 days ago
6 days ago


Inflation Outlook Moving Forward

The short-term outlook for inflation is highly uncertain in the eurozone. Here are some key factors to consider:

  • US tariffs could lower eurozone inflation by reducing exports and slowing economic growth.

  • These tariffs increase the supply of goods in the eurozone as the US restricts access to their market.

  • If the European Commission retaliates, it could push inflation higher as these measures act like a domestic tax that consumers will partly bear.

Last year, ECB President Lagarde hinted at potential rate cuts, stating that more clarity would be gained in April and June. This year, the April ECB meeting will discuss US tariffs on European goods and the EU’s planned response, which will influence future interest rates.

One concern is the tight job market, with the unemployment rate hitting a record low of 6.1% in February. Lower-than-expected inflation supports the case for another rate cut to bring rates closer to neutral. Currently, markets are pricing in an 82% chance of a 25 bps rate cut at the upcoming ECB meeting on April 17.

ECB Interest Rate Expectations

Market expectations for ECB interest rates are evolving. Here are some key points to keep in mind:

  • Markets are preparing for potential tariff announcements from US President Donald Trump.

  • ECB President Christine Lagarde emphasized the importance of working together for a better future on April 2, dubbed “Liberation Day” by Trump.

  • The White House is considering a 20% tariff on most imported goods, with plans to use the revenue for tax refunds or dividends.

Technical Analysis – DAX Index (DAX 40)

Technical analysis of the DAX Index reveals interesting insights:

  • The index has performed well YTD but shows signs of a potential correction with a double top pattern forming.

  • A break below the neckline at 22405 could trigger a selloff, especially with weaker inflation data and impending tariff announcements.

  • Immediate resistance levels are at 22886, 23200, and recent highs at 23454, while support levels are at 22405, 21758, and the 200-day MA at 21164.

DAX 40 Daily Chart, April 1, 2025

Here is the daily chart for the DAX Index on April 1, 2025:

DAX-Daily Chart

For more information, you can refer to the original post here.

Source: TradingView.com

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Analysis:

The article provides a comprehensive overview of the current economic landscape in the eurozone, focusing on inflation outlook, ECB interest rate expectations, and technical analysis of the DAX Index. Here’s a breakdown of the key takeaways for readers:

  • Inflation Outlook: Uncertainty prevails due to US tariffs impacting exports and economic growth. The response from the European Commission could influence inflation levels.

  • ECB Interest Rate Expectations: Market anticipation of potential tariff announcements and the implications for future interest rates are crucial factors to monitor.

  • Technical Analysis of DAX Index: Insights into the index’s performance, potential correction patterns, and key resistance and support levels offer valuable information for investors.

Understanding these facets is essential for individuals looking to navigate the financial landscape and make informed decisions regarding investments and financial planning. Stay informed, stay ahead!

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