CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

DAX in focus as ECB decides on policy

Article By: ,  Financial Analyst
July 25, 2019 7:11 AM

This week’s main event for a lot of traders is upon us: The European Central Bank is set to announce its latest interest rate decision later. The euro, stocks and gold should all move sharply. ECB’s policy statement will be published at 12:45 BST, but it will be during President Mario Draghi's press conference, which starts at 13:30 BST, where we may see the fireworks.

While we think there won’t be any change of policy at this meeting, there’s a growing risk that the ECB may deliver a surprise rate cut thanks to a deteriorating Eurozone economy and weak inflationary pressures.

Indeed, after a very poor showing from the manufacturers yesterday, when the the latest sector PMIs came out below expectations with the German manufacturing contracting at its weakest pace in over 7 years, this morning we had more bad news from the Eurozone’s economic powerhouse. The German Ifo Business Climate Index, which is based on surveyed manufacturers, builders, wholesalers, services, and retailers, came in at its weakest level since April 2013. The July print of 95.7 was also weaker than 97.2 expected.

So, heading into the ECB meeting it is reasonable to expect some sort of easing to be announced at this meeting, although it is more likely that the central bank may prepare the markets for easing in September instead.

Such dovish expectations have pushed government bonds across the Eurozone higher and yields to extremely low levels. Yesterday, for example, the 10 year Greek yield plunged below 2% for first time ever. And today, the entire Swiss yield curve has fallen into negative territory! Yes, that includes the 50-year yields as well, which has fallen below 0% for the first time since August 2016.

With government bond prices rallying as investors try to front run central banks, higher yielding stocks remain supported for now and more gains could be on the way should the ECB deliver what the markets demand: more QE.

Ahead of the ECB decision, the DAX was actually on the back-foot. But it has gained strong bullish momentum this week after ending lower in the past two weeks. So today’s weakness may prove to be temporary. However, if the ECB disappoints given the very high expectations then this week’s entire gains could be wiped out quickly.

Source: Trading View and City Index. Please note this product may not be available to trade in all regions.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024