The DAX Index is almost unchanged in the Thursday session. Currently, the DAX is trading at 12,065.75 points. On the release front, Eurozone CPI Flash Estimate jumped to 2.0%, beating the forecast of 1.8%. Later in the day, the US releases unemployment claims, which is expected at 243 thousand, little changed from the previous release. On Friday, Germany releases Retail Sales, with an estimate of 0.2%. The US releases ISM Non-Manufacturing PMI, and the markets will be listening closely as Janet Yellen and three other FOMC members will deliver speeches.
German data was positive on Thursday. Preliminary CPI rebounded with a strong gain of 0.6%, matching the estimate. Unemployment rolls dropped by 14 thousand, better than the estimate of -10 thousand. As well, German Final Manufacturing PMI improved to 56.8, just shy of the estimate of 57.0. Will retail sales follow suit with a strong reading on Friday? This important consumer spending indicator has posted two straight declines, but is expected to show a gain in the January report.
There was plenty of anticipation in the air ahead of President Trump’s speech to Congress. In the end, however, the speech was short on specifics and the markets haven’t shown much reaction in the Wednesday session. Trump promised "massive" tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, "financed through both public and private capital". Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we’ve seen in the past.
With Federal Reserve policymakers continuing to sound hawkish about a rate move, the US dollar could make some headway against the euro, which could weigh on the DAX. On Tuesday, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed, which raised the odds of a March hike at 66%, according to Reuters. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets will be listening closely to speeches from other FOMC members this week, culminating in speeches from Janet Yellen and Fed Governor Stanley Fischer on Friday.
