The Dax should have a hard time today – this has already suggested yesterday, when the German leading index again presented itself significantly weaker than the US indices. This was also due to the weakness of the US dollar following the Fed’s rate hike. While the Fed is expecting US economic output to rise next year when the US tax reform comes, it also makes clear that this is only a short time effect, which should be likely to fizzle quickly. The US tax reform is not only expensive, but also massively increases the indebtedness of the United States. The dollar suffers as markets interpret yesterday’s Fed rate hike as “dovish hike”.
In other words, it is doubtful that the Fed will actually raise interest rates three times next year, as in 2017 next year. That should weigh on the dollar further, providing further buoyancy for the euro. Today, of course, the ECB meeting is in focus, and we think it´s unlikely that Mario Draghi manages again today to push the euro sustainable. Unlike the announcement on the continuation of the QE at the last meeting, Draghi now has not enough in his pocket to prevent the further increase in the Euro in the short time. We assume that the euro can continue to grow until initially in the range 1.1880 – which in turn should not really influence the Dax!
Let’s take a look at the X-Dax – that’s not really convincing:
It looks like the motivation is missing! The Dax does not seem to be interested in what the big brother S&P 500 does. There’s no momentum, no real will. So Mario Draghi has to judge today, but he has little to offer – rather, the ECB is likely to continue raising its expectations for eurozone growth in its projections, giving the euro more tailwind – but not to the Dax!
So we expect that the Dax will presumably look at the 13,000 mark again from below, but without experiencing a harsh sell-off. This expectation would turn out to be wrong only if the Dax jump over the 13,200er mark would succeed, which would then negate the unsightly picture of the last days with the descending highs. But that´s not our favorite scenario ..