Clash of Central Bankers: DAX Kicks Off the Week of Rate Decisions
The DAX is heading into a week dominated by fundamental decisions from global central banks. While the past week closed positively thanks to a strong Monday (over 2 percent gain), subsequent days were characterized by indecisive ups and downs. The focus is now on Thursday, when the European Central Bank (ECB) will decide and clarify its monetary policy. No rate cut is expected from the ECB. However, expectations for a rate cut by the US Federal Reserve (Fed) remain extremely high. This divergence between central banks is expected to cause volatility in the markets.
Caution with Market Euphoria: Is a Correction Due After the Fed Decision?
Although the pattern of recent weeks suggests rather positive markets leading up to the Fed decision, the extreme market euphoria regarding the US rate cut should be viewed critically. The market has almost entirely priced in the cut. The fact-based, objective approach of central banks often leads to disappointment on the day of the decision when expectations are overblown, which can frequently trigger a short-term sell-off. Investors should therefore factor in the potential for disappointment.
DAX in No Man's Land: Decision Looms Over 1,500-Point Range
Technically, the DAX is currently stuck in a slightly upward-sloping trading range of about 1,500 points (lower boundary around 23,400, upper boundary around 24,900). The index is currently trading in the middle of this range. For investors, this "no man's land" means increased uncertainty, as the probability of being right or wrong about the direction is 50:50. The market may remain indecisive until the central bank decisions. The impulses from the ECB and the Fed will then determine whether the DAX stages a breakout toward new record highs or undergoes a correction downward.
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